Glossary of Business Law Ch. 11
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- Definition of a contract
- An enforceable promise; A promise or agreement that a court will enforce; Promises are enforcable legal duties.
- Common law
- Judge made law; Court cases, over a period of time, have developed a number of legal priniciples
- Uniform Commercial Code
- Article Z of the UCC applies to contracts for the sale of goods (tangibles).
It is a model law. Almost every state has adopted the UCC in some form
- The function of contracts
- To provide certainty; To assure parties to private agreements that the promise will be enforceable
- Offeror - Makes the offer
Offeree - To whom the offer is made
- Bilateral contract
- A promise in exchange for a promise; Each person promises to perform whatever it is that he agreed to.
"If you agree to paint my house, I will pay you $2000"
- Unilateral contract
- A promise in exchange for an act. The offer is phrase in such a way that the offeree accepts the offer by completely the contract performance.
"If you paint my house, I will pay you."
- Express contract
- The terms of the contract are explicitly stated. Words whether oral or written are used.
- Implied-in-fact contract
- Contract is formed based on the parties conduct. Conduct implies an obligation to pay
- Implied-in-law (quasi) contract
- Not an actual contract; The court will impose a coract on the parties. The reason is that that courts are trying to be fair or prevent an unjust inrichment by one party at the expense of another (Landscpaing example)
- Executed contract
- A contract that has been complely performed by both parties
- Executory contract
- A contract that has not yet been fully performed
- Valid contract
- All of the contract elements are present
- Void contract
- No contract exists; There are no legal obligations on the part or either party.
- Voidable contract
- The contract is valid, but can be avoided by on of the parties
- Unenforceable contracts
- A valid contract rendered unenforceable by some statue or law
- An offer by one party to form a contract and the acceptance of the offer by the person to whom the offer is made
- Three elements of an offer
- 1. There must be a serious, objectiveintention by the offeror
2. The terms of the offer must be reasonably certain or definite
3. The offer must be communicated to the offeree
- The offeror revokes the offer
- The offeree rejects the over.
- The offeree rejects the original offer and makes a new offer
- Three terminations of an offer by operation of law
- 1. Time expires (or after the passage of the a reasonable amount of time)
2. Subject matter is destroyed
3. Offeror dies
- By word or conduct, the offeree shows that he 'agrees' to the terms of the offer
- Mirror image rule
- A common law rules that requires that the terms of the offeree's acceptance adhere exactly to the terms of the offeror's offer
- Mailbox rule
- The acceptance of an offer becomes effective on disbatched (being placed in the mailbox).
- Something of "legally sufficient value" is given in exchange for a promise. There must be a bargained fro exchange.
- Gifts and consideration
- There is no consideration because the other party hasn't given up anything
- Flagpole and consideration
- If the agreement is halfway completed, one cannot revoke or reject the agreement
- preexisting duty and consideration
- A promise to do what one is already obligated to do doesn't constitute consideration
- Smoking and consideration
- The promise not to do what one has the legal right to do can constitute consideration
- Promissory estoppel
- Justifiable reliance on a promise. There must be a clear and definite promise; The promise must be justifiably relied on; The reliance must be of substantial and definite character; Justice will be better served by the enforcement of the promise.
- The mental ability to enter into a contract
- Capacity and minors
- Contracts by minors are voidable at the option of the minor until the minor eithe affirms the contract upon becoming an adult or a reasonable amount of time passes after the minor reaches adulthood.
- Capacity and drunks
- Contracted enetered into by an intoxicated person are voidable by such persons for a reasonable amount of time after sobrity is regained.
- Capactiy and incompetents
- If a court determines that an individual is mentally unfit to manage his own affairs, such person contracts are void from that moment in time on
If a person is unfit, but has not yet been declared so by a court, his contracts are voidable
- For a contrac to be valid and enforceable, it must be formed for a legal purpose. A contract do do smething that is prohibited by law is illegal, void, and unenforceable
- Unilateral mistake
- A mistake made by one person is not a valid contract defense
When both parties are mistaken the contract is voidable by either party
- Fraud in the inducement (5)
- A person who is lied to or deceived can get out of a contract (voidable) if one of the following:
2. A material (important) fact is lied
3. There is intent to deceive
4. Reasonable reliance by the innocent party
- Innocent misrepresentation
- If a party can establish that the other party innocenty misrepresented a fact, the party can undo the contract
- Undue influence
- Occurs when one party overcomes the free will of another. Usually occurs when a person abuses a position of trust (parent/child)
- Forcing another party to enter into a contract by the use of a threat
- Statute of Frauds
- Certain contracts must be in writting to be enforceable such as:
Contracts that cannot be completed within one year
Purchase of Land
Goods over $500
- What law states that the sale of goods over $500 must be in writing?
- Article 2 of the UCC
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