Business Law Study Guide - Chapters 11 & 12: Nature, Terminology, and Agreement

Comprehensive vocabulary flashcards defining core contract law concepts, classifications, rules of interpretation, offer and acceptance mechanics, and electronic contract statutes from Chapters 11 and 12.

Promise

A declaration by a person (the promisor) to do or not do a certain act.

Promisor

The person making the promise.

Promisee

The person to whom a promise is made; has a right to expect or demand performance.

Contract

A promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty (Restatement (Second) of Contracts, Sec. 1); an agreement enforceable in court.

Objective Theory of Contracts

The doctrine under which a party's intent to form a contract is judged by outward, objective facts as a reasonable person would interpret them (words, conduct, and circumstances), rather than by secret or subjective intent.

Agreement

A mutual understanding or meeting of the minds between parties concerning the terms of a contract, evidenced by an offer and an acceptance.

Consideration

Something of legally sufficient value received or promised (such as money) to convince a person to make a deal, representing a bargained-for exchange.

Contractual Capacity

The legal qualification, competence, or capacity recognized by law that qualifies parties to enter into an enforceable contract.

Legality

The contractual requirement that the contract's purpose must be to accomplish a goal that is legal and not against public policy.

Bilateral Contract

A contract that arises when a promise is given in exchange for a return promise ('promise for a promise'); formed the moment promises are exchanged without needing immediate performance.

Unilateral Contract

A contract that results when an offer can be accepted only by the completion of a requested act ('promise for an act'); formed when the act is performed.

Formal Contract

A contract that requires a special form or method of creation (formation) to be enforceable, such as negotiable instruments or letters of credit.

Informal Contract

A simple contract that requires no special form or method of creation to be enforceable, resting on substance rather than form.

Express Contract

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

Implied Contract (Implied-in-Fact)

A contract formed from the conduct of the parties rather than their words, requiring that the plaintiff furnished service or property, expected payment, and the defendant had an opportunity to reject it.

Executed Contract

A contract that has been completely and fully performed on both sides.

Executory Contract

A contract that has not yet been fully performed by one or both sides.

Valid Contract

A contract having all four essential elements (agreement, consideration, legal capacity, and legal purpose) necessary to entitle at least one party to enforce it in court.

Voidable Contract

A valid contract that can be avoided (canceled) or ratified at the option of one or both parties (e.g., contracts made by minors, mentally incompetent or intoxicated persons, or entered under fraud or duress).

Unenforceable Contract

A valid contract rendered unenforceable by some statute or legal defense (such as a requirement that it be in writing), rather than failing a formation requirement.

Void Contract

An agreement that produces no legal obligations or legal rights; it is not a contract at all (e.g., entered into by a party previously adjudicated mentally incompetent or having an illegal purpose).

Quasi Contract

A fictional contract implied in law ('as if') imposed by courts on equitable grounds to prevent unjust enrichment, which cannot be used if an actual contract already exists.

Plain Meaning Rule

The rule of interpretation providing that when a contract's writing is clear and unequivocal, a court enforces it according to the obvious meaning found on the face of the instrument alone.

Extrinsic Evidence

Any evidence outside the contract document itself (such as testimony of parties and witnesses or negotiation communications), admissible to interpret meaning only when contractual terms are ambiguous.

Offer

A promise or commitment to do or refrain from doing some specified action in the future, requiring serious intention, reasonably definite terms, and communication to the offeree.

Revocation

The offeror's act of withdrawing an offer before acceptance, effective in most states when actually received by the offeree or the offeree's agent.

Option Contract

An irrevocable offer created when an offeror promises to hold an offer open for a specified period of time in exchange for consideration (payment) paid by the offeree.

Rejection

An offeree's refusal of an offer through words or conduct, which terminates the offer only when actually received by the offeror or their agent.

Counteroffer

A rejection of the original offer accompanied by the simultaneous making of a new offer.

Mirror Image Rule

A common-law principle requiring that the offeree's acceptance must match the offeror's offer exactly; any modification or addition terminates the offer and operates as a counteroffer.

Acceptance

A voluntary act by the offeree showing unequivocal assent to the terms of an offer, communicated to the offeror.

Mailbox Rule (Deposited Acceptance Rule)

A rule stating that acceptance takes effect and a contract forms at the moment the offeree dispatches it via an authorized mode (e.g., deposited in the mail), rather than upon receipt.

Click-On Agreement

An electronic contract formed when a user manifests assent to terms online by clicking an 'I accept' or 'I agree' button.

Shrink-Wrap Agreement

An agreement whose terms are packaged inside the product's container, providing that the party who opens the box and keeps the product agrees to the terms.

Browse-Wrap Terms

Terms and conditions posted on a website that do not require the user to explicitly click or assent to them before downloading or using software or content.

Partnering Agreement

An agreement in advance between a frequent buyer and seller establishing terms, conditions, and access codes that apply to all future electronic transactions between them.

E-Signature

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.

E-SIGN Act

A federal law passed in 2000 stating that no contract, record, or signature may be denied legal effect solely because it is in electronic form, provided parties agreed to electronic records and the document is retainable.

Uniform Electronic Transactions Act (UETA)

A uniform state act promulgated in 1999 and adopted by at least 48 states establishing that signatures and records cannot be denied enforceability solely because they are electronic, applied when parties agree to conduct transactions electronically.

Arbitration Clause

A contractual provision specifying that any dispute arising out of the contract will be resolved through arbitration in a designated forum under chosen law.

Forum-Selection Clause

A contractual provision indicating the specific court, jurisdiction, or geographical location where disputes arising under the contract will be litigated.

Choice-of-Law Clause

A contractual clause specifying which state's or nation's law will govern any disputes arising under the agreement.