Chapter 12

Question 1

Contract law deals with

Answer 1

the formation and keeping of promises.

Question 2

Contract

Answer 2

An agreement that can be enforced in court formed by two parties.

Question 3

Objective theory of contracts

Answer 3

Theory under which the intent to form a contract will be judged by outward, objective facts rather than by the party’s own subjective intentions.

Question 4

Requirements of a valid contract

Answer 4

• Agreement
• Consideration
• Contractual Capacity
• Legality

Question 5

Agreement

Answer 5

A meeting of two or more minds in regard to the terms of the contract.

Question 6

Consideration

Answer 6

Exchange of items between parties

Question 7

Contractual Capacity

Answer 7

Possess the characteristics that qualify them as competent parties

Question 8

Legality

Answer 8

Contract must be legal

Question 9

Defenses to enforcing a contract

Answer 9

• Voluntary Consent
• Form

Question 10

Voluntary Consent

Answer 10

Consent of both parties must be voluntary.

Question 11

Form

Answer 11

The contract must be in the form that the law requires.

Question 12

Bilateral Contract

Answer 12

A type of contract that arises when a promise is given in exchange for a promise.

• Comes into existence the moment the promises are exchanged

Question 13

Unilateral Contract

Answer 13

A contract that results when an offer can be accepted only by the offeree’s performance.

• Formed at the moment the contract is performed

Question 14

Formal Contract

Answer 14

A contract that by law requires a specific form, such as being sealed, to be valid.

Question 15

Informal Contract

Answer 15

A contract that does not require a specified form in order to be valid.

Question 16

Express Contract

Answer 16

Contract in which the terms of the agreement are fully and explicitly stated in words, oral or written.

Question 17

Implied Contract

Answer 17

A contract formed in whole or in part from the conduct of parties.

Question 18

Valid Contract

Answer 18

A contract that results when the elements necessary for contract formation are present.

Question 19

Unenforceable Contract

Answer 19

A valid contract rendered unenforceable by some statute or law.

Question 20

Voidable Contract

Answer 20

A contract that may be legally avoided at the option of one of the parties.

Question 21

Void Contract

Answer 21

A contract having no legal force or binding event.

Question 22

Offer

Answer 22

Promise or commitment to perform or refrain from performing some specified act in the future.

Question 23

Intention

Answer 23

Serious intent is determined by what a reasonable person in the offeree’s position would conclude that the offeror’s words meant.

Question 24

Revocation

Answer 24

The withdrawal of an offeror by an enforcer.

Question 25

The power of the offeree to transform the offer into a binding, legal obligation can be terminated by operation of law through

Answer 25

- Lapse of time - Destruction of the specific subject matter - Death or incompetence of the offeror or offeree - Supervening illegality of the proposed contract

Question 26

Lapse of time

Answer 26

The offer terminates when the period of time specified has passed.

Question 27

Acceptance

Answer 27

The offeree’s notification to the offeror that the offeree agrees to the terms of the proposal.

Question 28

Silence cannot constitute acceptance unless

Answer 28

the offeree has had prior dealings with the offeror.

Question 29

E-contract

Answer 29

A contract that is entered into cyberspace and is evidenced only by electronic impulses.

Question 30

Click-on agreement

Answer 30

An agreement that arises when a buyer indicates their assent to be bound by the terms of an offer by clicking on a button that says, “I agree”.

Question 31

Shrink-wrap agreement

Answer 31

An agreement whose terms are expressed in a document located inside a box in which the goods (usually software) are packaged.

Question 32

Under the E-SIGN Act, an E-document can be as enforceable as a paper one with the exception of

Answer 32

documents such as court papers and divorce decrees.

Question 33

Consideration must be something of value in the eyes of the law and may consist of

Answer 33

- A promise to do something that one has no prior legal duty to - Forbearance

Question 34

Forbearance

Answer 34

The act of refraining from exercising a legal right.

Question 35

Agreements that lack consideration

Answer 35

- Preexisting Duty - Past Consideration

Question 36

Preexisting Duty

Answer 36

A promise to do what one already has a legal duty to do does not constitute legally sufficient consideration.

Question 37

Past Consideration

Answer 37

Something given, or some act done in the past, which cannot ordinarily be consideration for a later bargain.

Question 38

Accord and Satisfaction

Answer 38

An agreement of payment between two parties, one of whom has a right of action against the other. - In the accord, one party undertakes to give or perform, and the other to accept, in the satisfaction of claim, something other than that of which the parties originally agreed on.

Question 39

Release

Answer 39

A contract in which one party forfeits the right to pursue a legal claim against the other party.

Question 40

Promissory Estoppel

Answer 40

A doctrine that applies when a promiser makes a clear and definite promise on which the promisee justifiably relies.

Question 41

Disaffirmance

Answer 41

The legal avoidance/setting aside of a contractual obligation.

Question 42

Usury

Answer 42

Charging an illegal rate of interest.

Question 43

Licensing Statutes

Answer 43

All states require members of certain professions to have licenses.

Question 44

Contracts in restraint of trade

Answer 44

Anticompetitive agreements are unenforceable because they’re contrary to public policy.

Question 45

Covenant not to compete

Answer 45

A contractual promise to refrain from competing with another party for a certain period of time and within a certain geographic area.

Question 46

Unconscionable Contracts or Clauses

Answer 46

A contract or clause that is void on the basis of public policy because one party is forced to accept terms that are unfair.

Question 47

Exculpatory Clause

Answer 47

A clause that releases a contractual party from liability in the event of monetary or physical injury no matter who is at fault.

Question 48

Statute of Frauds

Answer 48

A state statute under which certain types of contracts must be in writing to be enforceable.

Question 49

If a contract cannot be performed within one year it

Answer 49

must be in writing.