Chapter 7 Vocab
Merchant: someone who deals in the kind of goods contracted for or who otherwise holds themselves out as having special knowledge or skill related to the goods involved
Contract: a legally enforceable promise
Agreement: evinced by an offer and an acceptance
Offeror: makes an offer to the offeree
Offeree: the person to whom the offer was made
Consideration: the legal value provided in a bargained-for exchange of a promise
Contractual capacity: the capacity required by law to enter into contracts
Legal subject matter: a requirement that a contract not accomplish an illegal goal or act
Express: either verbal or written contract
Implied: contract inferred from the actions of the parties and is not evinced by an oral or written agreement
Executory: contracts for which one party still owes performance
Executed: contracts where both parties have performed and no performance is still due
Voidable: contracts for which one party has the option of nullifying the contract or enforcing it
Void: contract is no contract at all. Cannot be enforced by a court
Formal: contracts that are required to conform to additional requirements imposed by the law, such as the need for a writing signed by the defendant, to be enforceable
Informal: contracts that are not subject to formal requirements under the law.
Unenforceable: contract that contains all the elements of a valid contract but are unenforceable by a court
Unilateral: contract that contains an offer that can be accepted by providing complete performance only
Bilateral: contract is accepted by a return promise
Offeror: the person making an offer
Offeree: person receiving the offer
Expression of opinion: generally, not an offer
Statement of future intention: a statement of future intention is not considered a legally binding offer
Solicitation of bids: common example of a statement of future intentions
Advertisement: generally not a legally binding offer unless it contains words of limitations such as limiting the quantity of the item being sold or the number of people who can accept
Auction: the auctioneer places an item for sale and solicits bids from those in attendance
With reserve: the seller or auctioneer may withdraw the item any time before the auctioneer accepts the highest bid and declares the item to be sold
Without reserve: neither the auctioneer nor the seller can withdraw an item once bidding has started.
Options contract: a contract under which the offeror promises to keep her offer open to the offeree until a specified date
Firm offer: Under UCC, an offer can become a firm offer if:
- The offer was made by a merchant
- There is a signed writing
- And the writing clearly states the offer is to remain open
After a reasonable amount of time: offers terminate after a reasonable amount of time depending on the facts and circumstances of each case
Rejection: offeree’s statement or other conduct that states the offeree’s desire to reject an offer and refuse acceptance
Counteroffer: rejects the original offer and makes a new offer
Inquiry: not a counteroffer; doesn’t terminate the original offer just inquires a lower price or something similar (an adjustment to the original terms of the offer)
Mirror-image rule: prohibits the offeree from accepting an offer while adding additional terms.
Mutual Assent: the agreementis sometimes referred to as mutual assent
Click-on agreement: used to describe these transactions because the user must click on the box to certify their assent
Shrink-wrap agreement: exists when the terms and conditions of the contract are contained in a product’s packaging but the terms cannot be accessed until the plastic wrap is removed from the box. Once the plastic wrap is removed the purchaser cannot return the product
Outputs contract: one in which the buyer agrees to purchase all of the output a seller produces
Requirements contract: a contract in which the seller agrees to sell the buyer all the product a buyer would need
Good faith: “honesty in fact and the observance of reasonable commercial standards of fair dealing.”
Chapter 8 Vocab
Consideration: something of legal value offered in bargain for a promise
Past consideration: consideration that would be legally sufficient to form a contract but the consideration was given before the offer was made
Preexisting duty: a duty that one already legally owes
Illusory promise: a promise that appears to be consideration but is not, as the promise itself does not legally obligate the promisor to a specific detriment
Doctrine of unforeseen circumstances: allows a contract to be modified from its original terms without requiring additional consideration, if the unforeseen circumstance was not foreseeable
Promissory estoppel: another example of an agreement that is enforceable even though it lacks consideration
A promise to pay for a debt: not legally required to be paid; often enforceable in courts even if no consideration is present.
Mutual rescission: occurs when both parties agree to return to their pre-contracting positions and suspend performance under their previous contract through a new contract
Novation: occurs when a party agrees to discharge their duties under a previous contract by substituting a new contract that creates new obligations on the behalf of the parties
Modification or Release: a novation in which a new obligation replaces a preexisting obligation
Accord and satisfaction: an agreement where the parties agree to satisfy a preexisting duty by imposing a new contractual duty
Minor: someone who has not reached the age of majority (18 in most states, 19 in some)
Disaffirm: to declare the voidable contract will not be honored or abided (for minors)
Ratification: a minor chooses to not disaffirm the contract
Restitution: restoring the other party to their original position
Emancipation: the legal process by which a minor becomes independent of their parents under the law, thereby losing their status as a minor
Lucid: to understand the consequences of one’s actions (in the context of a contract negotiation)
Unconscionable contracts: contracts that ‘shock’ the conscience of the court
Substantive unconscionability: contracts whose terms a court finds to be egregious or extremely unfair
Procedural unconscionability: contracts that are created as part of a process that a court finds to be unconscionable
Exculpatory clause: relieves a party from liability in the event an injury results from performance of the contract
Adhesion contract: a contract in which one party has a superior amount of bargaining power that eliminates the other party from bargaining for better terms in a contract
Chapter 9 Vocab
Prenuptial agreement: to determine what will happen to each party’s assets in the event of a divorce or death after the two parties are married (subject to the Statute of Frauds)
Palimony: the promise to pay alimony to a pal who is not a spouse
Alimony: court-ordered requirement of payment to be made by a divorced spouse
Parole Evidence Rule: disallows evidence of prior oral negotiations prior to the integration of their agreement into a written contract if the purpose of the evidence of prior oral negotiations is to contradict the terms of the written contract
Subsequent modification: a modification that occurs after the written agreement is signed
Course of performance: how the parties have interpreted terms in a contract as evinced by performance under the contract
Course of dealing: how the parties have acted in previous dealings with one another
Usage of trade: a court will look to see how those engaged in the type of business involved in the contract dispute define similar terms
Consent: (for purposes of contract law) to agree to the terms of the contractual agreement
Unilateral mistake: occurs when only one party to a contract is mistaken
Bilateral mistake (Mutual mistake): when both parties to contract are mistaken; to serve as a defense against contract enforcement, a mutual mistake must be material and not trivial
Misrepresentation: occurs when a party to a contract makes a misstatement of a material fact upon which the other party relies and suffers damages because of their reliance
Puffing: the process by which a seller overstates or exaggerates the value or performance of a good
Innocent misrepresentation: when a party makes a representation that turns out to be false but does not do so intentionally
Negligent misrepresentation: occurs when a party breaches their duty of care toward another by stating something that is untrue
Undue influence: a party to contract is unfairly influenced (persuaded) and agrees to contractual terms that the party would not normally consent to absent the undue amount of influence
Chapter 10 Vocab
Complete performance: means a party has performed the duties under the terms of the contract; relieves a party of further contractual liability
Substantial performance: a party has not provided complete performance but has not committed a material breach
Material breach: occurs when a party does not perform a significant duty under their contract
Condition precedent: a condition that must be satisfied before performance is required by another party under a contract
Condition subsequent: a condition that requires performance until a condition is no longer satisfied
Concurrent conditions: if both parties are subject to conditions (mutual conditions)
Express condition: a written or verbal condition to a contract
Implied condition: a condition which is neither written nor oral but nonetheless exists as a part of the contract and can be inferred from the facts surrounding the contract
Objective condition: contains a reasonableness standard in regards to determining or judging when the condition has been met
Subjective condition: determined to be satisfied by the subjective opinion of a party to a contract
Compensatory damages: meant to compensate or reimburse the plaintiff for what they have lost
Expectation damages: the difference between the position where the plaintiff expected to be and where the plaintiff was left after the breach
Reliance damages: compensate the plaintiff for expenses they have incurred by relying on the contract that was breached by the defendant
Restitution damages: equal to the amount of value the defendant has received
General damages: must be reasonably foreseeable; the defendant must not have actual notice of the possibility of damages if the damages are general in nature
Special or consequential damages: damages which require notice to be received by the defendant
Specific performance: to do specifically as promised
Injunction: a court order that demands a defendant stop performing an action
Rescission: the act by which a court cancels or undoes a contract
Reformation: an equitable remedy that a court uses to change or modify the terms to a contract
Scrivener’s error: a typographical error
Punitive damage: a damage that is not meant to compensate a party for a loss suffered from the breach of contract, but is instead designed to punish the breaching party for improper behavior
Liquidated damages: damages provided in a contract that are meant to compensate the non-breaching party in the event of a breach of contract
Nominal damages: small amount of damages awarded in a contract breach case that are intended to establish liability on the part of the breaching party but not necessarily compensate the party for damages realized
Incidental damages: damages arising because of the breach of the seller and include costs such as shipping the goods back to the seller or having the goods inspected by a third party
Consequential damages: damages that compensate the injured party for costs or lost profits caused because of the breach or damages and that the seller knew would result or had reason to know would result
Anticipatory repudiation: occurs when a party to contract informs the other party to a contract that it will be unable to perform under the terms of the contract
Objective impossibility: a legal doctrine that discharges a party from their contractual duties if it is impossible to perform such duties and the difficulty was not foreseeable at the time of contracting
Commercial impracticability: a legal doctrine where a court discharges a party from their contractual duty because it is commercially impractical but not objectively impossible
Frustration of purpose: a legal doctrine that discharges the duty of parties to perform where the original purpose of their contract can no longer be achieved
Intended beneficiary: a party whom the original parties to contract intend to benefit
Incidental beneficiary: a party whom the original parties did not intend to benefit with their contract
Creditor beneficiaries: owed performance by one of the parties because of a preexisting obligation owed to the intended beneficiary
Donee beneficiaries: not owed a performance because of an existing duty but because a party to the contract has decided to provide them a benefit
Assignment: occurs when a party transfers its rights under a contract to a third party
Assignor: the party who transfers a right
Assignee: the party receiving the right
Obligor: a party who owes a performance under a contract
Delegator: the party who delegates a duty
Delegatee: the party to whom a delegation of duty has been made
Obligee: the person to whom a duty is owed
Important to know
- What are the four requirements of a contract?
- Agreement- includes an offer and an acceptance
- Consideration- legal value provided in a bargained-for exchange
- Contractual capacity- all parties must have it; assumed to be present
- Legality- contract must not accomplish an illegal goal or purpose
Court Cases
Chapter 7
Carlill vs. Carbolic Smoke Ball Co.
Facts:
Ruling:
Significance:
Lucy vs. Zehmer
Facts:
Ruling:
Significance:
Roto-Lith Ltd. Vs. F.P. Bartlett & Co.
Facts:
Ruling:
Significance:
Shelton vs. Oscar Meyer Food Corporation
Facts:
Ruling:
Significance:
Chapter 8
Hamer v. Sidway
Facts:
Ruling:
Significance:
Shields vs. Gross
Facts:
Ruling:
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First State Bank of Sinai vs. Hyland
Facts:
Ruling:
Significance:
Tunkl v. Regents of University of California
Facts:
Ruling:
Significance:
Chapter 9
Wright vs. Wright
Facts:
Ruling:
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Aydin Corp v. US
Facts:
Ruling
Significance:
Kase vs. French & French
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Chapter 10
Jacobs & Young vs. Kent
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Ruling:
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Hawkins vs. McGee
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Bain vs. Gillispie
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Practice Exam
- Ryan hires Sarah to clean his house this upcoming Saturday. The two agreed on $80 compensation. Ryan has paid Sarah, but Sarah hasn’t cleaned yet. What type of contract?
- Executory
- Formal
- Unilateral
- Void
- Assume Iowa has a requirement that all employment contracts for a period of greater than one year must be in writing. If you are entering into a 2 year contract, what type would it be?
- Executory
- Formal
- Unilateral
- Void
- Assume Kendal hires Kyle to steal a rare car from a local museum. They type up a contract laying out the compensation and time line for the agreement. What type of contract do Kendal and Kyle have?
- Executory
- Formal
- Unilateral
- Void
- Professor said in class, “I would like to sell my car for $45,000.” Rachel replied “I’ll buy it.” What type of contract do the two parties have?
- They don’t have a contract
- Informal
- Formal
- Unilateral
- Tony is at a livestock sale that is without reserve. A piglet is up for auction. Tony and other bidders have started making offers to purchase. Then, the seller walks out with his crying 4 year old daughter and declares the piglet will be going home with them. What result?
- The piglet would go home with the little girl because she is crying
- The piglet would stay in the auction because the auctioneer dislikes kids and won’t let the little girl take the piglet
- The piglet would go home with the little girl because a seller may withdraw their item any time before the auctioneer accepts the highest bid and declares the item to be sold
- The piglet would stay in the auction because the bidding has started
- On January 1, Justin offers to sell Kullen his prized Pokémon collection for $799. Kullen pays Justin $49 in return for Justin’s promise to keep the offer open until April 1. What type of contract is this?
- Requirements contract
- Options contract
- Inquiry
- Outputs contract
- Henry agrees to buy all the milk Jerry, a dairy farmer, can produce on his farm. What type of contract?
- Requirements contract
- Options contract
- Inquiry
- Outputs contract
- Historically, courts will not consider the value of consideration unless
- The amount of consideration is extremely small, a peppercorn
- The amount of consideration is very large, a berry
- The courts always consider the value of consideration
- The courts never consider the value of consideration
- John contracts with Makenna to build her a new dog house for $500. He promises to have the dog house done prior to November 1. On October 1, John says to Makenna, “If you want the dog house done by November 1 I will need an additional $100.” Makenna agrees. Upon completion of the project, Makenna gives John $500 cash. John demands the other $100. Could John successfully take Makenna to court over this matter?
- Yes, Makenna made a return promise which constitutes consideration
- No, Makenna’s promise was an illusory promise
- Yes, this is promissory estoppel
- No, John already had the duty to finish the job by 11/1 and provided no additional consideration
- Clint and Brad have a contract under which Brad is to buy Clint’s prized pig. The pig becomes sick and both Clint and Brad agree the pig will not be sold. This is an example of?
- Novation
- Accord and satisfaction
- Contractual change
- Mutual rescission
- Mike hires Rita to mow his lawn while he is on vacation to Europe for 8 weeks and agrees to pay her $50 each time she mows, but she should only mow as the grass needs it. A drought occurs while Mike is on vacation. He assumes she mowed the lawn one or two times. She claims she mowed it twice a week and he owes her $800. Mike offers $100 instead of $800. If she accepts, can Rita successfully take Mike to court in hopes of getting the additional $700?
- Yes, they agreed on $50 per mow and she mowed 16 times.
- No, they agreed on an accord
- Yes, she thought the $100 was just a first payment
- No, courts never get involved in contract law
- Sarah is extremely intoxicated and sells her grandmas diamond ring to Pauline for $125.