BLAW EXAM 3

Sale

A contract involving the transfer of title to goods from seller to buyer for a price.

Goods

Tangible personal property. Personal property is any property other than an interest in real property (land or anything attached to the land).

Contract

* A binding agreement that the courts will enforce.

A promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes a duty.

Breach

The failure to properly perform a contractual obligation.

Requirements of a Contract

1. Manifestation of Mutual Assent.
2. Consideration.
3. Legality of Object.
4. Capacity.

Mutual Assent

The parties must manifest by words or conduct that they have agreed to enter into a contract.

Consideration

Each party must intentionally exchange a legal benefit or incur a legal detriment as an inducement to the other party to make a return exchange.

Capacity

Parties must have contractual capacity.

Ability of an individual to enter into a binding legal contract, and face the consequences.

Implied in Fact Contract

Agreement of the parties is inferred from their conduct.

Express Contract

Agreement of parties that is stated in words either in writing or orally.

Bilateral Contract

Both parties exchange promises.

Unilateral Contract

Only one party makes a promise.

Promisor

Person who makes a promise to do or not to do something in exchange for something else. They are the party who is obligated to perform under the terms of the contract..

Promisee

The person to whom a promise is made. They are the party who is entitled to enforce the promise made by the promisor.

Valid Contract

Contract that meets all of the requirements of a binding contract and is, therefore, an enforceable agreement.

Void Contract

No contract at all and is without legal effect

Voidable Contract

Not wholly lacking in legal effect; it is a contract, but because of the manner in which it was formed or a lack of capacity of a party to it, the law permits one or more of the parties to avoid the legal duties created by the contract.

Unenforceable Contract

* Legal agreement that cannot be enforced by a court of law.


* This can occur due to legal defects such as illegality, lack of consideration, or violation of public policy.
* The contract may be valid on its face, but it cannot be enforced by a court of law.

Executed Contract

Contract that has been fully performed by all of the parties.

Executory Contract

Contract that has not been fully performed by one or more of the parties.

Promissory Estoppel

A legal doctrine that stops someone from breaking a promise if the other person relied on it and suffered a loss. If someone makes a promise and the other person relies on it and suffers, the promisor may not be able to break the promise.

Quasi Contract

Obligation not based upon contract that is imposed by law to avoid injustice; also called a contract implied in law.

Elements:

* a benefit conferred on the defendant by the plaintiff;
* an appreciation or knowledge by the defendant of the benefit;
* acceptance or retention by the defendant of the benefit under circumstances making it inequitable for the defendant to retain the benefit without paying the plaintiff for its value.

Objective Standard

What a reasonable person would do or think in a situation. It helps determine if a person's actions or decisions were legally acceptable.

It differs from the subjective standard, which is based on individual beliefs or intentions.

Offer

An indication of willingness to enter into a contract.

Offeror

The person making the offer.

Offeree

The person to whom the offer is made

Essentials of an Offer

Must be communicated to the offeree, must manifest an intent to enter into a contract, and must be sufficiently definite and certain.

Auction Sale

The auctioneer at an auction sale does not make offers to sell the property being auctioned but invites offers to buy.

The bid is an offer, and if it is accepted, a contract results.

A bidder is free to withdraw his bid at any time prior to its acceptance, and the auctioneer is free to withdraw the goods unless the sale is advertised to be without reserve.

Without Reserve

The item will be sold to the highest bidder regardless of the final bid price, with no minimum or reserve price set by the seller.

Open Terms

Open terms in a sale mean no specific payment or delivery dates are set. The buyer and seller must negotiate details later. This can create uncertainty and risk for both parties.

Good Faith

Defined as honesty in fact in the conduct or transaction concerned.

Commercial Reasonableness

Standard measured by the judgment of reasonable persons familiar with the customary practices in the type of transaction involved and with regard to the facts and circumstances of the case.

Output Contract

Agreement of a buyer to purchase the entire output of a seller’s factory for a stated period.

Requirements Contract

Agreement of a seller to supply a buyer with all his requirements for certain goods.

Revocation

Cancellation of an offer by an offeror brings an offer to an end.

The offeror may revoke the offer by giving notice to the offeree. The notice effectively terminates the offer when the notice is received by the offeree.

An offer made to the general public is revoked only by giving equivalent publicity to the revocation as was given to the offer.

Certain limitations have been imposed on the offeror’s power to revoke.

Option Contract

Contracts which provide that an offer will stay open for a specified period of time are enforceable if they comply with all of the requirements of a contract, including the payment of consideration by the offeree to the offeror, and such offers cannot be revoked during the specified time.

Firm Offer

A merchant is bound to hold open an offer to buy or sell goods for a stated period not over three months, if the merchant gives assurance in a signed writing that it will be held open.

Enforceable even though no consideration is given.

Rejection

The refusal of an offeree to accept an offer is effective when received by the offeror.

Express or implied rejection terminates the power of acceptance

Counteroffer

Counterproposal from the offeree to the offeror that indicates a willingness to contract but on terms different from the original offer.

It operates as a rejection and terminates the original offer upon receipt by the offeror. It also operates as a new offer.

Conditional Acceptance

Claims to accept an offer, but it is contingent upon the acceptance of an additional or different term.

Acceptance

Manifestation of a willingness to enter into a contract on the terms of the offer.

Authorized Means

Explicitly permitted actions agreed upon by all parties. This can include procedures for communication, payment, delivery, and other necessary actions to fulfill the terms of the contract. Breaching these authorized means can result in legal consequences.

Mirror Image Rule

Provides that an acceptance cannot deviate from the terms of the offer.

Any communication by the offeree that attempts to modify the offer is not an acceptance but a counteroffer.

Battle of the Forms

When two parties use their own standard form contracts with different terms in a contract. This can cause a dispute over which terms apply.

If the offeree does not expressly make acceptance conditional upon the offeror’s assent to the additional or different terms, a contract is formed.

Duress

The wrongful or unlawful act or threat that overcomes the free will of a party. It leaves the victim with no reasonable alternative. The test for duress is subjective.

Undue Influence

The unfair persuasion of a person by a party in a dominant position based on a relationship of trust or confidence renders a contract voidable.

Very carefully scrutinizes contracts between those in a relationship of trust and confidence that is likely to permit one party to take unfair advantage of the other, such as a guardian and ward.

Fraud in the Execution

This type of fraud is extremely rare and renders a contract void.

It consists of a misrepresentation that deceives the other party as to the nature of the document evidencing the contract.

Fraud in the Inducement

Intentional misrepresentation of a material fact by one party to the other, who consents to enter into a contract in justifiable reliance on the misrepresentation.

When this type of fraud exists, there is a contract, but it is voidable at the option of the defrauded party.

Misrepresentation

Positive statement or conduct that misleads.

Concealment

Action taken to keep another from learning a fact, can form the basis for fraud.

Silence ordinarily will not constitute a misrepresentation except in the case of a fiduciary.

Fiduciary

One who owes a duty of trust, loyalty, and confidence to another.

Puffing

Statements of value by a salesperson.

Scienter

The knowledge or awareness of a party to a contract that they are making false or misleading statements. It is the intent to deceive or defraud the other party.

Negligent Misrepresentation

A false representation made without due care in ascertaining its truthfulness.

Innocent Misrepresentation

A false representation made without knowledge of its falsity but with due care.

Mutual Mistake

Where both parties have a common but erroneous belief forming the basis of a contract.

If the mistake relates to a basic assumption on which the contract is made and has a material effect on the agreed exchange, then it is voidable by the adversely affected party unless he bears the risk of the mistake.

Unilateral Mistake

An erroneous belief of only one of the parties to a contract.

Relief will be granted only where the non-mistaken party knows, or reasonably should know, that such a mistake has been made or where the mistake was caused by the fault of the non-mistaken party.

Consideration

What each party to a contract gives or receives in return for their promise or obligation under the contract.

This could be money, property, services, or some other benefit.

Must be something that is legally sufficient, which means it must be something that has some value in the eyes of the law.

Consideration must be given in exchange for the promise or obligation that is being undertaken, rather than given as a gift or for some other reason.

Gratuitous Promise

Made without consideration, and therefore it is not legally enforceable.

Legal Sufficiency

The consideration for the promise must be either a legal detriment to the promisee or a legal benefit to the promisor.

Legal Detriment

Refers to the obligation or loss that a party to a contract agrees to undertake or suffer as a result of entering into the agreement.

* The doing (or promising to do) something that the promisee has no prior legal obligation to do.

OR

* The refraining from doing (or promising to refrain from doing) something that he has no legal obligation to refrain from doing.

Legal Benefit

Obtaining something that one had no prior legal right to obtain.

Usually, where there is a legal detriment to the promisee, there is also a legal benefit to the promisor.

Adequacy of Consideration

The requirement of legal sufficiency is not at all concerned with whether the bargain was good or bad.

Not required where the parties have freely agreed to the exchange.

Mutuality of Obligation

The promises are binding provided there is either a legal benefit to the promisor or a legal detriment to the promisee. Each promise is the consideration for the other party’s promise.

Illusory Promise

Promise that imposes no obligation on the maker of the statement is illusory, and it cannot serve as consideration.

Can be distinguished from other promises that do impose obligations of performance upon the promisor and thus can be legally sufficient consideration.

Exclusive Dealing Contract

Contract where a manufacturer grants to a distributor the sole right to sell goods in a defined market.

There is an implied obligation imposed on the manufacturer to use its best efforts to supply the goods and on the distributor to use her best efforts to promote their sale.

With these implied obligations there is legally sufficient consideration.

Conditional Promise

Where obligations are contingent upon the occurrence or nonoccurrence of a stated, uncertain event.

It is sufficient consideration unless the promisor knows at the time of making the promise that the condition cannot occur.

Substituted Contract

Contract where the parties agree to rescind their original contract and to enter into a new one.

Perfectly valid and effective to discharge the original contract and to impose the obligations under the new contract.

Undisputed Debt

An obligation whose existence and amount is not contested.

Under the common law, payment of a lesser sum of money than is owed in consideration of a promise to discharge such a liquidated debt is legally insufficient to support the promise of discharge.

An early payment or a payment in a different manner than originally agreed can constitute legally sufficient consideration.

Disputed Debt

An obligation whose existence or amount is contested.

A promise to settle a validly disputed claim in exchange for an agreed payment or other performance is supported by consideration.

Bargained-for-Exchange

A mutually agreed-upon exchange.

Past Consideration

The element of exchange is absent where a promise is given for an act already done.

Statute of Limitations

Provides a time period in which a lawsuit to enforce a debt must be initiated.

A new, written promise by the debtor to pay the debt is binding without consideration and renews the running of the statute for a second statutory period.

Contract Under Seal

Under the common law, no consideration for a promise under seal was necessary.

Some states still follow this rule.

Licensing Statute

A formal authorization to engage in certain practices.

Regulatory License

A measure designed to protect the public against unqualified practitioners.

Examples are licenses to practice law or medicine.

Revenue License

A measure to raise money.

If the license is regulatory, a person cannot ordinarily recover fees for professional services rendered unless he has the required license. However, if the law is for revenue purposes only, agreements for unlicensed services are enforceable.

Wager

An agreement that one party will win or lose depending upon the outcome of an event in which the parties’ only interest is that gain or loss.

Courts generally refuse to recognize the enforceability of a gambling agreement, although some states permit certain regulated gambling such as state-operated lotteries.

Usury Statute

Establish maximum permissible rates of interest. Rates and applications vary greatly from state to state.

Courts require evidence of the following factors:


1. A loan.
2. Of money.
3. That is repayable absolutely and in all events.
4. For which an interest charge is exacted in excess of the interest rate allowed by law.

Restraint of Trade

Any agreement that eliminates or tends to eliminate competition or otherwise obstructs trade or commerce.

Covenant not to Complete

An agreement to refrain from entering into a competing trade, profession, or business.

Enforceable if:


1. The purpose of the restraint is to protect a property interest of the promisee.
2. The restraint is no more extensive than is reasonably necessary to protect that interest. Restraints typically arise in two situations: (a) the sale of a business, and (b) employment contracts.

Exculpatory Clause

Excuses one party from liability for his own tortious conduct.

When they are relieving a person from tort liability for harm caused intentionally or recklessly are unenforceable as violating public policy.

Ones that excuse a party from liability for harm caused by negligent conduct are scrutinized carefully by the courts and have also been held unenforceable in certain cases.

Unconscionable Contracts

Contract is unfair or unduly harsh.

Procedural Unconscionability

Refers to unfair or irregular bargaining.

Substantive Unconscionability

Refers to oppressive or grossly unfair contractual terms.

Minor

Person who is under the age of legal majority, which is 18 in most jurisdictions today.

Disaffirmance

The exercise of a minor’s power to avoid a contract.

Any time before reaching the age of majority and within a reasonable time after coming of age, as long as the minor has not already ratified the contract.

Either express or implied; no particular form is necessary so long as it shows an intention not to be bound.

Ratification

Option for minors to make the contract binding from the beginning.

Must validate the whole contract, both as to burdens and benefits.

Occurs through:

* Express Language
* Implied from Conduct
* Failure to make a timely disaffirmance.

Necessaries

Items that suitably and reasonably supply a person’s needs.

Minors are liable for the reasonable value of these items, which may be different from the contract or selling price.

Include those things that the minors need to maintain themselves in a particular station in life.

Guardianship

The relationship under which a person is appointed to preserve and control the property of another (the ward).

Mentally Incompetent

Those who are unable to understand the nature and effect of their acts.

Agreements are voidable.

Under traditional test, they are unable to comprehend the subject of the contract, its nature, and its probable consequences.

Statute of Frauds

In order to be enforceable, certain contracts must be evidenced by a written memorandum signed by the party to be charged (the one you want to sue).

Mimed at preventing fraud in the proof or evidence of oral contracts by perjured testimony in court.

Suretyship

A promise to pay a debt or perform duties of a third person if the principal debtor fails to do so.

Surety

The person who promises to perform.

Collateral Promise

Is an undertaking to be secondarily liable, that is, liable if the principal debtor does not perform.

“If X doesn’t pay, I will,”

Main Purpose Doctrine

If the main purpose of the promisor/surety is to provide an economic benefit to herself, then the promise comes within the exception and is outside the statute, i.e., no writing is necessary to enforce the promise.

Parol Evidence Rule

Neither party to a final, complete written contract is later permitted to show that the contract they made is different from the terms and provisions that appear in the written agreement.

Integrated Contract

Written agreement that embodies the complete and final expression of the parties' agreement.

Course of Dealing

A sequence of previous conduct between the parties that establishes a common basis for understanding.

Usage of Trade

A practice or method of dealing regularly observed and followed in a place, vocation, or trade.