Glossary of Business Law Chapter 4

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Explain the function of contract law.
Contract law determines which agreements will be enforced by the courts and which will not.
Compare and contrast a bilateral contract with a unilateral contract.
A unilateral contract is a promise given in exchange for an act. It is accepted by performing the specified act. A bilateral contract is a promise given in exchange for another promise. The exchange of promises represents consideration and makes the promises binding.
Define the concept of agreement.
a valid contract requires an offer and acceptance resulting in agreement.
Explain the elements of a valid offer.
1. the offeror has an intention to be bound by the offer 2. the terms of the offer are reasonably definite 3. the offer is communicated to the offeree.
Compare and contrast subjective intent with objective intent.
courts will evaluate the offeror's outward expression of intent(objective intent), not his or her secret intention (subjective intent.)
Explain why advertisements are generally not valid offers.
Sellers do not have an unlimited ability to provide services or an unlimited supply of goods. If advertisements were offers, then who "accepted" could sue the seller for breach of contract if the seller's supply ran out.
Explain how an offer may be terminated by either the offeror or the offeree.
The offeror can revoke its offer at any time before the offeree accepts. It is also terminated is the offeree rejects it. A counteroffer is also a rejection of the origial offer.
Define the term revocation.
to annul an offer by recision.
Explain what an option contract means.
A contact in which the offeror promises to hold an offer open for a certain amount of time.
Explain the concept of detrimental reliance.
occurs when an offeree has changed his or her position because of justifiable reliance on an offer.
Explain the concept of promissory estoppel.
A promise that the promisor should reasonably expect to induce action or forbearance on the part of the promissee or a third person and that does induce such action or forbearance can create liability for reliance damages if injustice can be avoided only by providing some relief when promise is broken.
Explain the ways an offer may be terminated by operation of law.
An offer terminates when the time of acceptance specified by the offeror has elapsed or at the end of a reasonable period if the offeror did not specify a time. Death or incapacitation of either party terminates an offer, as does destruction of the subject matter.
Explain the concept of acceptance.
An agreement to the amount offered for certain services or products. Acceptance may be verbal, written, or implied by action.
Explain the mirror-image rule.
A traditional rule of contract formation that requires the offeree's acceptance to be a mirror image of what the offeree has offered.
Define the concept of consideration.
A thing of value (money, services, an object, a promise, forbearance, or giving up the right to do something) exchanged in a contract.
Explain the concept of contractual capacity.
the ability (requisite presence of mind) to enter into a binding contract.
Explain the concept of undue influence.
sufficient influence and power over another as to make genuine assent impossible .
Define fiduciary relationship.
a person having a duty to act primarily for the benefit of another in matters connected with connected with undertaking fiduciary responsibilities; the obligatin of a trustee or other fiduciary to act for the benefit of the other party.
Explain the concept of duress.
Explain the term that is oppressive or fundamentally unfair.
a contract term that is oppressive or fundamentally unfair.
Define adhesion contract.
an unfair type of contract by which sellers offer goods or services on a take-it-or-leave-it basis, with no chance for consumers to negotiate for goods except by agreeing to the terms of said contract.
Define illegal contract.
a contract is illegal if its formation or performance is expressly forbidden by a civil or criminal statute, or if a penalty is imposed for doing the act agreed upon.
Define the Statute of frauds.
a statute that requires that certain contracts, such as contracts conveying an interest in real property, must be in a signed writing to be enforceable in a court.
Define the parole evidence role.
if there is a written contract that the parties intended would encompass their entire agreement, oral evidence of a prior or contemporaneous statements will not be permitted to vary or alter the terms of the contract.
Define the concept of privitity of contract.
the necessity for a person injured by a product to be in a contractual relationship with the seller of the product in order for the injured person to recover damages.
Define the concept of third party.
on who does not give consideration for a promise yet has legal rights to enforce the contract. A person is a third-party beneficiary with legal rights when the contracting parties intended to benefit that person.
Define anticipatory repudiation.
if a party indicates before performance is due that it will breach the contract, there is an anticipatory repudiation of the contract.
Define novation.
the method of contract modification by which the oriiginal contract in canceled and a new one is written with perhaps only one change, such as substitution of a new party.
Define accord and satisfaction.
an agreement to accept performance that is difference from what is called for in the contract.
Compare and contrast impossibility and impracticability of performance and what is required for each defense.
Impossibility is an excuse for nonperformance based on the destruction of something vital to the performance of the contract or another unforeseen event that makes performance of the contract impossible. Impracticability is a situation in which performance is possible but is commercially impractical.
Define restitution.
an award made to a plaintiff of a benefit improperly obtained by the defendent.
Define and explain specific performance.
a court order to a breaching party to complete the contract as promised.
Compare and contrast a rejection with a counteroffer.
A rejection is when the offeree rejects the offer made by the offeror. A counteroffer is a new offer by the original offeree.
Explain the mailbox rule.
a contract is formed when the letter is put in the mailbox; the offeror cannot thereafter revoke the offer.
Explain when a contract entered into by a mentally competent person will be valid.
If the person was able to understand the nature and effect of the agreement then even if he or she lacked capacity to engage in other activities, the contract is valid, with no voidability option.
Explain when a contract entered into by a mentally incompetent person will be void.
if a court has adjudged the party incompetent and appointed a guardian for him or her, the contract is void.
Explain when a contract entered into by a mentally incompetent person will be voidable.
if the party simply lacked mental capacity to comprehend the subject matter, the contract is voidable.
Compare and contrast assignment with delegation.
Contract rights are assigned, while contract duties are delegated.

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