Chapter 9 Business Law

Contract

binding agreement that the courts will enforce 1. mutual assent 2. Consideration 3. Legality o objects 4. capacity

Capaity

must have legal capacity to contract and cannot have limited capacity

1. All of the following are relevant to defining the principles of contract law EXCEPT: a. federal common law. b. state common law. c. Restatements of the Law of Contracts. d. Uniform Commercial Code.

A

15. Contract law: a. has more relaxed requirements today than in the nineteenth century. b. has more rigid requirements today than in the nineteenth century. c. has remained static throughout the nineteenth and twentieth centuries. d. is governed primarily by the Uniform Commercial Code.

A

3. CPA: Kay, an art collector, promised Hammer, an art student, that if Hammer could obtain certain rare artifacts within two weeks, Kay would pay for Hammer's post-graduate education. At considerable effort and expense, Hammer obtained the specified artifacts within the two-week period. When Hammer requested payment, Kay refused. Kay claimed that there was no consideration for the promise. Hammer would prevail against Kay based on: a. unilateral contract. b. unjust enrichment. c. public policy. d. quasi contract

A

5. An executed contract is one in which: a. all duties under it have been performed by all parties to the contract. b. at least one party has performed all of its duties under the contract. c. there are one or more unperformed promises by any party to the contract. d. the contract is wholly unperformed by one or more of the parties.

A

8. A manifestation of the intention to act or refrain from acting in a specified way is best described as: a. a promise. b. an agreement. c. a contract. d. none of the above.

A

4. Distinguish between a contract and a gift and explain why one is enforceable and the other is not.

A contract has the element of consideration associated with it. The duties associated with a contract have been bargained for, whereas the making of a gift is a gratuitous situation and thus not enforceable.

12. A contract in which one party seeks an act in exchange for a promise is a(n): a. quasi contract. b. unilateral contract. c. implied in fact contract. d. bilateral contract.

B

2. The Uniform Commercial Code defines goods as: a. tangible and intangible personal property. b. tangible personal property. c. land and anything attached to it. d. none of the above.

B

10. UCC Article 2 applies to contracts involving which of the following? a. The services of an accountant b. An employment relationship c. The sale of a television set d. The sale of a private residence

C

7. A promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes a duty, is best described as: a. a promise. b. an agreement. c. a contract. d. none of the above.

C

9. A contract in which the parties indicate their assent in words is a(n): a. quasi-contract. b. implied contract. c. express contract. d. unlawful contract.

C

Remedies for breach of contract

Compensatory damages equitable remedies Reliance damages restitution

Executory contract

Contract not fully performed

11. A contract in which both parties exchange promises is a(n): a. formal contract. b. quasi contract. c. implied in fact contract. d. bilateral contract.

D

13. A contract which fails to satisfy the requirements of the statute of frauds is: a. valid. b. void. c. voidable. d. unenforceable.

D

14. Bill Businessman places an ad in the local newspaper saying, "Reward: $50 for return of my golden retriever named Fido." The ad lists his address and telephone number. If Tim Teenager finds Fido and returns him to Bill, there will be: a. an executed contract requiring that Bill pay Tim $50. b. a bilateral contract, because two people are involved. c. an implied in fact contract requiring that Bill pay Tim $50. d. a unilateral contract, because Bill has promised to pay $50 but Tim hasn't promised anything.

D

4. The remedies provided for breach of contract include: a. compensatory damages. b. punitive damages. c. reliance damages. d. (a) and (c), but not (b).

D

6. Each of the following is an essential element of a binding promise EXCEPT: a. mutual assent. b. consideration. c. capacity. d. a writing signed by the parties.

D

Consideration

Each party to a contract must intentionally exchange legal benefit or incur a legal detriment as an inducement to the other part to make a return echange

9. A bilateral contract results from the exchange of a promise for an act, whereas a unilateral contract results from the exchange of a promise for a return promise.

False Bilateral is a promise for a promise Unilateral is a promise for an act

3. A contract to provide legal services for a fee is governed by Article 2 of the UCC.

False Services are under common law

4. As defined by the UCC, goods are movable, tangible and intangible personal property.

False goods only need to be tangible

14. Thomas says to Steve, "If you will paint my garage, I will pay you $75." Steve replies, "Would you make it $85?" Under these facts, Thomas and Steve are both promisors and promisees.

False, but they did not agree to the terms There was an offer, but no acceptance

12. A voidable contract is an agreement that does not meet all of the requirements of a binding contract; thus, it is no contract at all and has no legal effect.

False, it is a contract, but the person in the contract can get out of the contract

7. A contract may be formed orally or by a writing, but it may not be inferred merely from the conduct of the parties.

False, it may be inferred by conduct

Promisor

Person making the promise

5. What is promissory estoppel? Explain your answer.

Promissory estoppel is an equitable doctrine under which noncontractual promises will be enforced where there has been justifiable reliance on the promise by the injured party and justice requires enforcement.

2. Arthur Accountant orally agrees to serve as an accountant for Clem Client in exchange for Clem's promise to pay Arthur an annual salary of $15,000. Describe this contract in terms of the following classifications: (a) express and implied; (b) unilateral and bilateral; (c) valid, void, voidable, and unenforceable; and (d) executory and executed.

The contract to provide accounting services to Clem for $15,000 involves an oral manifestation of willingness by both parties to enter into a contract. Therefore the contract is express, even though not in writing. The contract also involves an exchange of promises. Arthur promised to provide accounting services for one year in exchange for Clem's promise to pay $15,000 to Arthur. Therefore the contract is bilateral. There is no evidence that the contract is void, voidable, or otherwise unenforceable. Therefore it is valid. Finally, since, at its inception, neither party has performed any of its duties, the contract is executory.

1. Discuss how state common law, the Restatements of the Law of Contracts, and Article 2 of the UCC combine to form the law of contracts.

The law of contracts is governed primarily by state common law. An often-cited source of this law is found in the Restatements of the Law of Contracts promulgated by the American Law Institute. In all states except Louisiana, however, Article 2 of the UCC governs sales. A sale is a contract involving the transfer of title to goods from seller to buyer for a price. In all transactions to which Article 2 does not apply, and in all those governed by Article 2 but where general contract law has not been specifically modified by the Code, contract common law continues to apply.

1. Most contracts are primarily governed by state common law.

True

10. An executory contract is one in which there are one or more unperformed promises by any party to the contract.

True

11. A quasi contract is not a contract, but rather is an obligation imposed regardless of the intention of the parties in order to assure a just and equitable result.

True

13. In certain circumstances, noncontractual promises are enforced under the doctrine of promissory estoppel in order to avoid injustice.

True

15. In a "quasi-contract" situation, the remedy granted will be similar to a breach of contract remedy

True

2. As defined by the UCC, a sale is the transfer of title to goods from seller to buyer for a price.

True

5. Where general contract law has not been specifically modified by the UCC, the common law of contracts continues to apply.

True

6. Nearly every business transaction is based on contract, and even the most common transactions may involve multiple contracts.

True

8. The courts will presume that the parties intended to form a bilateral contract when it is unclear whether a unilateral or a bilateral contract has been formed.

True

3. Explain why and how certain promises are enforceable even though they do not meet all the requirements of a contract.

Under the doctrine of promissory estoppel and the theory of quasi-contract, promises are sometimes enforced even though they do not meet contractual requirements. Under promissory estoppel a noncontractual promise will be enforced where there has been justifiable reliance on the promise and justice requires enforcement. A quasi-contract is not actually a contract at all because it is based neither on an express nor an implied promise but rather is an obligation imposed by law to avoid injustice.

Express contract

agreement of parties that is stated in words either in writing or orally

Voidable

contact capable of being made void by the defrauded party/minor not the other person

Unenforceable contract

contract for the breach of which the law does not provide a remedy violate the statute of frauds

Executed contract

contract fully performed by all parties

Implied in fact contract

contract in which agreement of the parties is inferred from their conduct

Bilateral contract

contract in which both parties exchange promises

Unilateral contract

contract in which only one part makes a promise

Valid contract

contract that meets all of the requirements of a binding contract

Promissory estoppel

doctrine enforcing non-contractual promises or which there has been justifiable reliance on the promise and justice requires enforement

Void contract

does not meet all the requirements of a binding contract it is a contract without legal effect

Quasi Contract

obligation not based upon contract that is imposed to avoid injustice Needs: 1. a benefit conferred upon the defendant by the plaintiff 2. the defendant' appreciation or knowledge of the benefit 3. acceptance or retention of the benefit by the defendant under circumstances making it inequitable for him to retain the benefit without compensating the plaintiff for its value

Promisee

person to whom the promise is made

Goods

tangible personal property

Mutual assent

the parties to the contract must manifest by words or conduct that they have agreed o enter into a contract. The usual method of mutual assent is by offer and acceptance

Sale

the transfer o title from the seller to the buyer