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

Mutual 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:
1. Misrepresentation
2. A material (important) fact is lied
3. There is intent to deceive
4. Reasonable reliance by the innocent party
5. Damage
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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