Chapter 10 - Contracts

Question 1

What is a bilateral contract?

Answer 1

Two promises are made, basically a contract for a contract (ex: you pay me $3 for this gum)

Contract is formed when promises are exchanged

Question 2

What is a unilateral contract?

Answer 2

One promise for an act (Ex: I’ll pay anyone $100 who will find my dog)

A contract is formed when performance is completed

Question 3

What are the four things that are required for the formation of a Common Law contract?

Answer 3

Offer, acceptance, consideration, lack of defenses

Question 4

What do Common Law contracts cover?

Answer 4

Real estate and services

Question 5

What is needed for an offer to be valid?

Answer 5

1. Definite terms (may be implied)
2. Intent to make offer or contract
3. Communication to offeree (constructively received when available to offeree)

Question 6

What is an implied-in-law (quasi-contract)?

Answer 6

Contract that occurs when the courts decide parties should be treated as if there was an agreement even though there wasn’t actually one.

Used to make sure one party is not unjustly enriched

Ex: If a person who appears to be poor is given substantial medical services for free but is found to be extremely wealthy later can be required to pay the fees if the courts require them to.

Question 7

What would cause an offer to terminate?

Answer 7

1. Expiration
2. Revocation (unless an option contract, which is consideration paid to keep the offer open)
3. Rejection
4. Couteroffer
5. Operation of law (death, insanity, destruction of subject matter, illegality of subject matter)

Question 8

What is the mirror image rule?

Answer 8

An offer must accept all terms and conditions without any alteration. If there are alterations then it is a couteroffer.

Question 9

What is the early acceptance (mailbox) rule and what are exceptions to this rule?

Answer 9

Acceptance is effective when transmitted or dispatched

Exceptions (effective when received) are when:

• States “only valid upon receipt” by offeror, so no mailbox rule
• Acceptance is made by unauthorized means
• Offer indicates that acceptance must be received by a specific date

Question 10

What are some examples of consideration?

Answer 10

All consideration must be legally sufficient

• Transfer of money
• Transfer of property
• Services
• Covenant not to compete (if reasonable)
• Out of court settlement

Question 11

What are two types of consideration that are NOT allowed for a contract?

Question 12

When does modifying a contract not terminate it?

Answer 12

When both parties are providing new consideration

Question 13

What are some examples of voidable events?

Answer 13

1. Duress using economic or social threats
2. Undue influence
3. Misrepresentation of material fact
4. Mistake
5. Capacity
6. Intoxication
7. Incompetent persons

Question 14

What is fraud in inducement?

Answer 14

When inaccurate statements were made with the expectation they’d be relied on, information was of proximate cause of harm to the plaintiff, and the other party had actual or constructive knowledge they were providing faulty information.

Question 15

What are examples of things that actually void a contract?

Answer 15

1. Extreme duress (physical threat)
2. Fraud in execution (party enters contract without being aware of it)
3. Illegal subject matter
4. Incompetent persons

Question 16

What is the statute of frauds and what type of contracts does it cover?

Answer 16

Statute that says that certain contracts must be in writing

GROSS

Sale of Goods worth $500 or more

Real estate sales

Over one year required to perform contract (bilateral)

Suretyship (guarantee debt of another)

Statements in consideration of marriage

Question 17

Who needs to sign a written contract?

Answer 17

The person who is backing out (the weasel)

Question 18

What are some exceptions to the statute of frauds concerning the sale of goods?

Answer 18

SPAM

Specifically manufactured by the seller

Partially performed (enforced to extent of performance)

Admits in court there was a contract

Merchant does NOT object within 10 days to confirmation

Question 19

What is the parole evidence rule?

Answer 19

Question 20

What is a novation?

Answer 20

When another party outside of the contract replaces the assignor

Question 21

What is an assignment?

Answer 21

If a party transfers the rights they possess in a contract to a third party, the assignee will enforce the rights transferred to them. The assignor loses the ability to enforce.

Question 22

What can cause discharge of a contract?

Answer 22

• By performance
• By agreement
  
  • Recission: the parties are restored to their originial position
  • Accord and satisfaction: “satisfaction of the new is satisfaction of the old”
  • Novation: one party accepts the performance of a third party in place of the party in the contract
• By operation of law
• By breach

Question 23

What is the statute of limitations?

Answer 23

Time period in which a lawsuit must be initiated