Business Law: Introduction to Contracts

Comprehensive vocabulary flashcards covering the fundamental principles of contract law, including formation, performance, enforceability, and remedies based on the lecture notes.

Contract

A voluntary agreement, or set of promises, supported by consideration, that demonstrates the intent of the parties to be bound by the agreement, the breach of which the law provides a remedy.

Equitable Relief

A court-ordered remedy used when money damages are inadequate or cannot make the victim whole, requiring a non-performing party to perform a specific act or stop doing something.

Uniform Commercial Code (UCC)

A set of laws adopted in part by all $50$ states to create consistency and certainty in commercial transactions involving sales of goods, leases, commercial paper, and securities.

Express Contracts

Contracts formed through explicit language, which can be either oral or written.

Formal Contracts

Contracts that must follow specific legal requirements for their form, such as the specific way a check must be filled out according to law.

Implied Contracts

Contracts based upon the conduct, traditions, and customs of the parties rather than written or spoken words.

Offeror

The person making the offer in a potential contract.

Offeree

The person receiving the offer in a potential contract.

Bilateral Contract

A contract where both parties exchange legally binding promises to one another; no act of performance is necessary to create the agreement.

Unilateral Contract

A contract that can only be accepted by the performance of an act by the offeree; it is considered a potential agreement until the requested act is performed.

Capacity

The legal competence of a party to enter into a contract, also referred to as being a competent party.

Voidable Contract

A contract that is otherwise valid but which one party, such as a minor or an incompetent person, has the legal right to disaffirm or avoid.

Necessities of Life

Essential items such as medical care, educational loans, military contracts, food, and shelter for which a minor may not disavow a contract.

Objective Cognitive Understanding Test

The legal test for mental incompetence which determines if a person's mental incapacity renders them incapable of understanding the nature of a transaction.

Status Quo Ante

The same position a party was in prior to the contract; used when returning a non-drunk party to their original state if a contract is voided due to intoxication.

Objective Theory of Contracts

A standard used to determine intent to enter a contract based on whether a reasonable person viewing the circumstances would conclude the parties intended to be legally bound.

Mirror Image Rule

The requirement that an acceptance must be a positive response that exactly matches the offer without any material deviation.

Undue Influence

A situation where one party takes advantage of another because of a special relationship of trust or reliance.

Duress

A defense to contract formation where a party is forced to sign a contract against their will under threat or confinement.

Fraud

An intentional misrepresentation of a material fact intended to deceive an innocent party who relies on it and is subsequently injured.

Mutual Mistake

A situation where both parties are wrong about a central assumption of the contract, also known as a bilateral mistake.

Unilateral Mistake

An error made by only one party to a contract; it generally does not provide grounds to void the agreement unless the other party knew of the error.

Consideration

The inducement that causes parties to contract, where the promisee suffers a legal detriment or the promisor receives a legal benefit.

Promissory Estoppel

Also called detrimental reliance, this doctrine makes a promise of a future gift binding if the recipient relies upon the promise and takes action to their detriment.

Insurable Interest

The legal requirement that a party purchasing insurance must have something of value that they stand to lose.

Adhesion Contract

A one-sided agreement between parties with vastly superior bargaining power offered on a 'take it or leave it' basis that may be deemed unconscionable if it shocks the conscience.

Statute of Frauds

A legal rule requiring certain contracts, such as land sales, leases longer than one year, or goods worth over $500$, to be in writing and signed.

Parole Evidence Rule

A rule stating that if a contract is in writing, the court will only look at the written document and will not consider outside testimony or side-agreements.

Void Agreement

A failed attempt to create a contract that has no legal effect, such as a contract to commit a crime.

Privity of Contract

The legal relationship between the specific parties within a contract.

Assignment

The act of transferring one's rights or duties under a contract to another person, who then becomes responsible for performance.

Executed Contract

A contract that has been fully performed by all parties.

Executory Contract

A contract where some performance or obligation remains to be completed by one of the parties.

Rescission

An agreement between parties to terminate a contract without full performance.

Novation

The discharge of an original party to a contract in favor of a new contract with a third party.

Accord and Satisfaction

A method of discharging a contract where the parties agree to a different performance than originally promised to satisfy the agreement.

Compensatory Damages

Money awarded to a non-breaching party to cover actual costs incurred due to the breach.

Expectancy Damages

A type of compensation for lost profits that the non-breaching party would have earned had the contract been performed.

Liquidated Damage Clause

A contract provision that sets a predetermined amount of damages to be paid in the event of a breach.

Duty to Mitigate

The legal requirement that a wronged party must act reasonably to minimize their damages resulting from a breach.

Quasi-Contract

An equitable doctrine where a court awards monetary damages for services provided even without a valid contract to avoid unjust enrichment.

Option Contract

A separate agreement to keep an offer open for a set period of time, which is not terminated by the death of the offeror or offeree.