Business Law Test

Mutual assent

Mutual assent

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

Consideration

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

Article 2 of the Uniform Commercial Code (UCC)

governs the sale of Tangible Personal Property (goods) in all states except Louisiana 

·   A sale is a contract involving the transfer > of title from seller to buyer for a price

·   Personal property is any property other than > real property 

Breach

failure to preform your contractional promises properly

Goods

Tangible personal property

Sale

the transfer of title from seller to buyer

Express contract

agreement of parties that is stated in words either in writing or orally

4 requirements of a Contract

Mutual assent, Consideration, legality of object,Capacity

Contract capacity

is generally defined as a person’s ability to understand in a meaningful way, at the time the contract is executed, the nature, scope, and effect of the contract.

Bilateral Contract

When two promises are exchanged and > each part is both promisor and promisee

Unilateral Contract

When a promise is exchanged for an act or >refraining from acting

Void Contracts

is an agreement that does not meet all of the requirements of a

binding contract; it is NOT actually a contract but merely a > agreement with no legal effect

ESSENTIALS OF AN OFFER

An offer is a definite proposal or undertaking made by one person(offeror) to offeree

indicating a willingness to enter into a contract. An offer gives the offeree the power to create a contract by acceptance. An offer must have these elements: (1)communication, (2)intent, (3)definiteness.

Variant Acceptances

A variant acceptance—one that contains terms different from or additional to those in the offer— receives distinctly different treatment under the common law and under the Code.

Offers and Communication and Intent (Advertisements)

A public announcement or advertisement generally set forth terms indicating only an invitation to deal. (Does not contain a promise and missing contract terms) It may, however, set forth an offer where the terms are clearly stated and all that is required of the offeree is some specific action. (Be Careful – cannot advertise a price – then raise the price ? illegal.)

ACCEPTANCE OF OFFER

“Acceptance” of an offer is necessary to create a contract and “marks” the moment the contract is formed

Effective Moment

We have already see that an offer, a revocation, a rejection, and a counteroffer are all effective when they are received. An Acceptance, however, is usually effective when it is sent, or upon dispatch. This is true unless the offer specifically states otherwise or the offeree responds by some unauthorized means, or the acceptance follows a prior rejection.

Revocation

Is done by the offeror, generally at any time prior to its acceptance by the offeree, by giving notice to

offeree using a reasonable means of communication. Terminates offer when notice received

Rejection

An offeree may accept or reject an offer as she desires (effective when?received by the offeror ). The offeree does not have to formally reject the offer, but may simply let the offer lapse without taking action. Once the offeror receives the rejection, the offer terminates, and the offeree cannot change his mind and accept.

Counteroffer

Sometimes, after receiving an offer, the offeree may let the offeror know she is interested and willing to contract, but on terms or conditions different from those proposed by the offeror. This proposal of different terms or conditions, in fact, creates a new offer called counter offer.

Common Law(Mutual assent)

Under Common Law, an Acceptance must be a “mirror image” of the offer. It may not change, add to, or subtract from, or qualify in any way the terms of the offer. If any variations from the offer occur in the acceptance, a counteroffer is created which does not form a contract.

UCC Code(Mutual assent)

The Mirror Image Rule of Common Law is modified by the UCC (the Code), primarily because of the realities of modern business practices, particularly the use of standardized business forms. The UCC focuses on the intent of the parties to determine if an offer was accepted without conditions.

Battle of the forms

sale, in which a buyer and a seller each attempt to complete a commercial transaction through the exchange of self-serving preprinted forms that clash, and contradict each other, on both material and minor terms.

Mirror image rule

an acceptance cannot deviate from the terms of the offer

basic elements of consideration

Legal sufficiency and Bargained for exchange

 LEGAL SUFFICIENCY

Considerations the legal value which supports a promise in a contract relationship; it is the inducement to make a contract enforceable. To be legally sufficient, the consideration for the promise must be either a (legal detriment) for the promisee or a (legal benefit) to the promisor. In other words, the promisor must receive something of legal value or the promisee must give up something of value in return for the promise.

Legal Detriment 

does not mean “harm”, but rather something which the promisee was under no legal obligation to do.

Legal Benefit

means the obtaining by the promisor of that which she had no prior legal right to obtain.

Conditional Promise

The obligation to perform depends upon the happening (or nonhappening) of a stated event. However, if the promisor knows that the conditional event CANNOT occur, the conditional promise will not be sufficient.

Modification of a Pre-Existing Contract

* Under Common Law, the Pre-Existing Duty rule requires that a Contract Modification be supported by Additional or New Consideration.

* Under the UCC (sale of goods), the rule is different. Contract Modifications are binding even without new consideration, provided both parties intend to modify the contract and are acting in good faith.

Bargained-For Exchange

requires a Mutually Agreed upon Exchange of Consideration

 SETTLEMENT OF AN UNDISPUTED DEBT

An Undisputed (liquidated??) Debt is an obligation whose existence and amount are NOT contested by the other party. Under Common Law, the payment of a lesser sum in return for the DISCHARGE of a fully matured, undisputed debt is NOT sufficient to support the promise of a Discharge. However, > *different consideration other than money would be sufficient 

SETTLEMENT OF A DISPUTED DEBT

A Disputed (unliquidated) Debt is an obligation whose existence or amount is validly > contested. The giving up or compromise of a Disputed Debt constitutes legally sufficient consideration if the dispute is honest and in good faith and thus will be enforced by the court.

Gratuitous promise

promise made without consideration,Certain promises are enforceable even though they are not supported by consideration

Substituted contract

parties rescind their original contract and enter into a new contract 

Statute of limitations

time period within which a lawsuit must be initiated 

Requirements contract

agreement to buy all of one’s needs