BUS 1130 - Business Law Exam 3

Contract

An agreement that can be enforced in court; formed by two or more parties, each of whom agrees to perform or refrain from performing some act now or in the future.

Promisee

A person to whom a promise is made.

Promisor

A person who makes a promise.

Promise

A person’s assurance that he or she will or will not do something.

Offeree

A person to whom an offer is made.

Offeror

A person who makes an offer.

Objective Theory of Contracts

A theory under which the intent to form a contract will be judged by outward, objective facts as interpreted by a reasonable person, rather than by the party’s own secret, subjective intentions.

Unilateral Contract

A contract that results when an offer can be accepted only by the offeree’s performance.

Formal Contracts

A contract that by law that arises when a promise is given in exchange for a promise.

Bilateral Contract

A contract that arises when a promise is given in exchange for a promise.

Express Contract

A contract in which the terms of the agreement are fully and explicitly stated in words, oral or written.

Implied Contract

A contract formed in whole or in part from the conduct of the parties (as opposed to an express contract).

Informal Contracts

A contract that does not require a specified form or formality in order to be valid.

Voidable Contract

A contract that may be legally avoided (canceled) at the option of one of the parties.

Valid Contract

A contract that results when the elements necessary for contract formation (agreement, consideration, contractual capacity, and legality) are present.

Executory Contract

A contract that has not yet been fully performed.

Executed Contract

A contract that has been completely performed by both parties.

Quasi Contracts

A fictional contract imposed on parties by a court in the interests of fairness and justice; usually, quasi contracts are imposed to avoid the unjust enrichment of one party at the expense of another.

Unenforceable Contract

A valid contract rendered unenforceable by some statute or law.

Void Contract

A contract having no legal force or binding effect.

Extrinsic Evidence

Evidence that relates to a contract but is not contained within the document itself, including the testimony of the parties, the testimony of witnesses, and additional agreements and communications. A court may consider _______ only when a contract term is ambiguous and the evidence does not contradict the express terms of the contract.

Offer

A promise or commitment to perform or refrain from performing some specified act in the future.

Agreement

A meeting of two or more minds in regard to the terms of a contract; usually broken down into two events—an offer by one party to form a contract, and an _____ of the offer by the person to whom the offer is made.

Revocation

In contract law, the withdrawal of an offer by an offeror. Unless an offer is irrevocable, it can be revoked at any time prior to acceptance without liability.

Counteroffer

An offeree’s response to an offer in which the offeree rejects the original offer and at the same time makes a new offer.

Option Contract

A contract under which the offeror cannot revoke his or her offer for a stipulated time period and the offeree can accept or reject the offer at any time during this period. The offeree must give consideration for the option to be enforceable.

Acceptance

1. In contract law, the offeree’s notification to the offeror that the offeree agrees to be bound by the terms of the offeror’s proposal.

2. In negotiable instruments law, the drawee’s sgned agreement to pay a draft when presented.

E-Contracts

A contract tat is entered into in cyberspace and is evidenced only by electronic impulses (such as those that make up a computer’s memory), rather than, for example, a typewritten form.

Mirror Image Rule

A common law rule that requires, for a valid contractual agreement, that the terms of the offeree’s acceptance adhere exactly to the terms of the offeror’s offer.

Mailbox Rule

A rule providing that an acceptance of an offer become effective on dispatch.

Click-On Agreement

An agreement that arises when a buyer, engaging in a transaction on a computer, indicates his or her assent to be bound by the terms of an offer by clicking on a button that says, for example, “I agree”.

Shrink-Wrap Agreement

An agreement whose terms are expressed in a document located inside a box in which goods (usually software) are packaged.

Forum-Selection Clause

A provision in a contract designating the court, jurisdiction, or tribunal that will decide any disputes arising under the contract.

Browse-Wrap Terms

Terms and conditions of use that are presented to an Internet user at the time a product, such as software, is downloaded but that need not be agreed to before the product is installed or used.

e-Signature

As defined by the Uniform Electronic Transactions Act, “an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.”

Partnering Agreement

An agreement between a seller and a buyer who frequenly do business with each other on the terms and conditions that will apply to all subsequently formed electronic contracts.

Record

According to the Uniform Electronic Transactions Act, information that is either inscribed on a tangible medium or stored in an electronic or other medium, and that is retrievable.

Consideration

Generally, the value given in return for a promise or a performance. The _____, which must be present to make the contract legally binding, must be something of legally sufficient value and must be bargained for.

Rescission

A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made; may be effected through the mutual consent of the parties, by their conduct, or by court decree.

Forbearance

The act of refraining from exercising a legal right; an agreement between a ledner and a borrower in which the lender agrees to temporarily cease requiring mortgage payments, to delay foreclosure, or to accept smaller payments than previously scheduled.

Accord and Satisfaction

An agreement for payment (or other performance) between two parties, one of whom has a right of action against the other. After the payment has been accepted or other performance has been made, the ______ is complete, and the obligation is discharged.

Past Consideraton

Something given or some act done in the past, which canot ordinarily be consideration for a later bargain.

Liquidated Debt

A debt that is due and certain in amount.

Covenant Not to Sue

An agreement to substitute a contractual oblgation for some other type of legal action based on a valid claim.

Release

A contract in which one party forfeits the right to pursue a legal claim against the other party.

Unliquidated Debt

A debt that is uncertain in amount.

Promissory Estoppel

A doctrine that applies when a promisor makes a clear and definite promise on which the promisee justifiably relies. Such a promise is binding if justice will be better served by the enforcement of the promise.

Estopped

Barred, impeded, or precluded.

Age of Majority

The age at which an individual is considered legally capable of conducting himself or herself responsibily and is entitled to vote. In contract law, the age at which one is no longer an infant and can no longer disaffirm a contract.

Contractual Capacity

The legal ability to enter into contracts; the threshold mental capacity required by law for a party who enters into a contract to be bound by that contract.

Emancipation

In regard to minors, the act of being free from parental control; occurs when a child’s parent or legal guardian relinquishes the legal right to exercise control over the child. Normally, a minor who leaves home to support himself or herself is considered ______.

Disaffirmance

The legal avoidance, or setting aside, of a contractual obligation.

Necessaries

_____ required for life, such as food, shelter, clothing, and medical attention; may include whatever is believe to be _____ to maintain a person’s standard of living or financial and social status.

Usury

Charging an illegal rate of interest.

Covenant Not to Compete

A contractual promise to refrain from ____ with another party for a certain period of time and within a certain geographic area. Although ____ restrain trade, they are commonly found in partnership agreements, business sale agreements, and employment contracts. If they are ancillary to such agreements, ____ will normally be enforced by the courts unless the time period or geographic area is deemed unreasonable.

Ratification

The act of accepting and giving legal force to an obligaton that previously was not enforceable.

Reformation

A court-ordered correction of a written contract so that is reflects the true intentions of the parties.

Exculpatory Clauses

A _____ that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault.

Unconcionable Contract or Clause

A _______ that is void on the basis of public policy because one party is forced to accept terms that are unfairly burdensome and that unfairly benefit the dominating party.

Voluntary Consent

Knowing and _____ to the terms of a contract. If _____ is lacking, the contract will be voidable.

Bilateral Mistake

A mistake that occurs when both parties to a contract are mistaken about the same material fact.

Unilateral Mistake

A ____ that occurs when one party to a contract is mistaken as to a material fact.

Latent Defects

A defect that is not obvious or cannot readily be ascertained.

Innocent Misrepresentation

A false statement of fact or an act made in good faith that deceives and causes harm or injury to another.

Scienter

Knowledge by the misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive.

Negligent Misrepresentation

Any manifestation through words or conduct that amounts to an untrue statement of fact made in circumstances in which a reasonable and prudent person would not have done that which led to the ____. A representation made with an honest belief in its truth may still be _____ due to:

1. A lack of reasonable care in ascertaining the facts.

2. The manner of expression.

3. The absence of the skill or competence required by a particular business or profession.

Undue Influence

Persuasion that is less than actual force but more than advice and that induces a person to act according to the will or purposes of the dominating party.

Adhesion Contracts

A “standard-form” contract, such as that between a large retailer and consumer, in which the stronger party dictates the terms.

Statute of Frauds

A state statute under which certain types of contracts must be in writing to be enforceable.

Prenuptial Agreements

An agreement made before marriage that defines each partner’s ownership rights in the other partner’s property. Prenuptial agreements must be in writing to be enforceable.

Collateral Promise

A secondary promise that is ancillary (subsidiary) to a principal transaction or primary contractual relationship, such as a promise made by one person to pay the debts of another if the latter fails to perform. A ____ normally must be in writing to be enforceable.

Parol Evidence Rule

A substantive rule of contracts under which a court will not receive into evidence that parties’ prior negotiations, prior agreements, or cntemporaneous oral agreements if that evidence contradicts or varies the terms of the parties’ written contract.

Integrated Contract

A written contract that constitutes the final expression of the parties’ agreement. If a contract is ______, evidence extraneous to the contract that contradicts or alters the meaning of the contract in any way is inadmissible.

Assignment

The act of transferring to another all or part of one’s rights arising under a contract.

Delegation

The transfer of a contractual duty to a third party. The party ____ the duty to the third party is still obliged to perform on the contract should the _____ fail to perform.

Obligee

One to whom an obligation is owed.

Assignee

The person to whom contract rights are assigned.

Assignor

The person who assigns contract rights.

Obligor

One who owes an obligation to another.

Alienation

In real property law, the voluntary transfer of property from one person to another (as opposed to a transfer by operation of law).

Delegator

One who delegates his or her duties under a contract to another, called the _____.

Third Party Beneficiary

One for whose benefit a promise is made in a contract but who is not a party to the contract.

Intended Beneficiary

A third party for whose benefit a contract is formed; an _____ can sue the promisor if such a contract is breached.

Delegatee

One to whom contract duties are delegated by another, called the delegator.

Incidential Beneficiary

A third party who _____ benefits from a contract but whose benefit was not the reason the contract was formed. An _____ has no rights in a contract and cannot sue to have the contract enforced.

Discharge

1. The termination of an obligation, such as occurs when the parties to a contract have fully performed their contractual obligations.

2. The termination of a bankruptcy debtor’s obligation to pay debts.

Performance

In contract law, the fulfillment of one’s duties arising under a contract; the normal way of discharging one’s contractual obligations.

Condition

A possible future event, the occurence or nonoccurence of which will trigger the performance of a legal obligation or termiante an existing obligation under a contract.

Condition Subsequent

A condition in a contract that operates to terminate a party’s absolute promise to perform.

Condition Precedent

A condition in a contract that must be met before a party’s promise becomes absolute.

Tender

An unconditional offer to perform an obligation by a person who is ready, willing, and able to do so.

Concurrent Conditions

Conditions in a contract that must occur or be performed at the same time; they are mutually dependent. No obligations arise under these conditions are simultaneously performed.

Anticipatory Repudiation

An assertion or action by a party indicating that he or she will not perform an obligaton that he or she is contractually obligated to perform at a future time.

Breach of Contract

The failure, without legal excuse, of a promisor to perform the obligations of a contract.

Mutual Rescission

An agreement between the parties to cancel their contract, releasing the parties from further obligations under the contract. The object of the agreement is to restore the parties to the positions they would have occupied had no contract ever been formed.

Discharge in Bankruptcy

The release of a debtor from all debts that are provable, except those specifically from discharge by statue.

Impossibiliy of Performance

A doctrine under which a party to a contract is relieve of his or her duty to perform when performance becomes ____ or totally impracticable (through no fault of either party).

Novation

The substitution, by agreement, of a new contract for an old one, with the rights under the old one being terminated. Typically, there is a substitution of a new party who is responsible for the contract and the removal of an original party’s rights and duties under the contract.

Commercial Impracticability

A doctrine under which a seller may be excused from performing a contract when:

1. A contingency occurs.

2. The contigency’s occurence makes performance _____.

3. The nonoccurence of the contigency was a basic assumption on which the contract was made.

Frustration of Purpose

A court-created doctrine under which a party to a contract will be relieve his or her duty to perform when the objective purpose for performance no longer exists (due to reasons beyond that party’s control).