ACCT 324 Exam 1

Know the contractual capacity of a minor.

- becomes emancipated (when guardians give up their right to exercise legal control over minor) - marries - their contracts are voidable, have right to dissafirm or void their contracts (ONLY THE MINOR CAN NOT PARENT)

elements of a valid offer

- manifestation or offerers intent to be bound -definite and certain terms -communication of offer to offeree

Recall four types of formal contracts

1. contracts under seal 2. recognizances 3. letters of credit 4. negotiable instruments

Know the three main purposes of licensing statutes.

1. to give the government some control over which people, and how many people, can perform certain jobs 2. by charging for licenses, the govt can obtain revenue 3. the protection of the publics health, safety, and welfare, is related to the public interest

List the three exceptions to the voiding of illegal agreements.

1. when a member of a protected class is party to an agreement that contradicts a statute intended to protect the specific class 2. justifiable ignorance of facts leaves one party unaware of a provision of the agreement that would make it illegal 3. when one of the parties withdraws from an illegal agreement

In which of the following situations does an express ratification by a minor occur?

An express ratification occurs when, after reaching the age of majority, a person states orally or in writing that he or she intends to be bound by the contract entered into as a minor.

These are true regarding silence as a means of acceptance of an offer?

By the parties' previous course of dealing, they have established a pattern of behavior that whereby it is reasonable to assume that silence constitutes acceptance. Silence can be acceptance if the offeree receives the benefits of the offered services with reasonable opportunity to reject them and knowledge that some form of compensation is expected yet remains silent. Silence can be acceptance if the parties agree that silence can demonstrate acceptance of the offer.

correct statements concerning contracts made by intoxicated persons

Courts tend to fairly liberally interpret behavior that appears to ratify the contract once the intoxicated person becomes sober. Contracts made by intoxicated people are generally considered enforceable if the intoxication merely causes the person to exercise poor judgment unless the other party unfairly capitalized on the impaired judgment. Contracts made by intoxicated people are generally considered voidable.

In a contract between Sophia and Carl, Sophia had agreed to pay Carl $30,000 to paint her house and redo her garden. Carl agreed to the terms. After painting the house, Carl decided and convinced Sophia that it would be a better deal for her if he could redo her swimming pool rather than the garden for the original price. Carl's duty under the original contract was discharged only after he performed the new duty. Which of the following methods to discharge a contract does this scenario best illustrate?

Discharge by accord and satisfaction.

Felipe, Adam, and Shirley are neighbors. Felipe overhears Adam's offer to sell an antique clock to Shirley for $3,000. Under these circumstances,

Felipe makes a new offer to Adam when he offers to buy the clock for $3,000.

Ronald agrees that he owes a bank $10,000, as claimed by the bank. Ronald explains to the bank that he can only pay the bank $8,000 as full payment toward the money he owes. The bank agrees to accept $8,000 from him. The following month, Ronald receives his new bank statement claiming that he still owes the bank $2,000. Which of the following statements is true of this scenario?

If Ronald does not agree to pay the remaining $2,000, the creditor may sue Ronald for the balance it believes is owed.

Maya pays $5,000 and purchases a car from her friend, Jane. Later, Maya realizes that the car is worth less than $3,000. Which of the following statements will be true if Maya plans to sue her friend?

Maya cannot sue Jane because the court seldom considers adequacy of consideration.

With regard to the enforceability of a present promise, which of the following is an accurate statement regarding past consideration?

Past consideration is no consideration at all.

If a person who suffers from a mental illness or defect yet still understands the nature of the contract and his or her obligations under the contract, which of the following will result?

The contract will be considered valid.

these demonstrate an acceptance by the offeree?

The offeree makes a return promise to the offeror. The offeree demonstrates acceptance by completing an action the offer requires. The offeree performs an act the offeror requests

In a novation, the original parties to the contract agree to which of the following?

The original parties to the contract and a third party all agree that the third party will replace one of the original parties and that the original party will then be discharged from his or her obligations under the contract.

If someone suffering from dementia has been appointed a guardian, which of the following is true regarding that person's ability to enter into a contract?

When someone has been appointed a guardian, that person's contracts are considered void.

Define lack of genuine assent.

a defense to the agreement of a contract in which the offeree claims that the offeror secured the agreement through improper means, such as duress, fraud, undue influence, or misrepresentation

An agreement in which a party is given an offer without the right to negotiate its terms is called a(n) _______ contract.

adhesion

Define a covenant not to compete

an agreement not to compete against a party for a set period of time within a designated geographic area

Implied conditions are those conditions which _______.

are not explicitly stated in the contract but are inferred from the nature and language of the contract

A person who has legal _______ has the mental ability to understand his or her rights and obligations under a contract.

capacity

Recall the two primary sources of contract law

case law and the UCC

_______ performance occurs when all aspects of the parties' duties under the contract are carried out perfectly.

complete

If a condition requires each party's performance to occur at the same time, then the contract contains a(n):

concurrent condition

Jason agrees to buy Sara's car for $10,000. However, Sara tells Jason that she will only sell the car to him if he pays $12,000. In this scenario, Sara makes a(n)

counteroffer

Contrast the express versus implied form of requirements for communication of a contractual acceptance

express - the terms of the contract are clearly formed either in written or spoken words implied- arises from the conduct of the parties rather than their words

_______ is when the means by which acceptance can occur is expressly stated in the offer.

express authorization

Define exculpatory clause.

frees one party (usually the drafter of the agreement) from all liability arising out of performance of the contract.

Define procedural unconscionability.

impairs one party's understanding of a contract, as well as the integration of terms into a contract

Explain promissory estoppel.

it is one exception to the rule requiring consideration. it occurs when these 3 conditions are met: 1. one party makes a promise and either knows or should know that the other party will reasonably rely on it 2. the other party does reasonably rely on the promise 3. the only way to avoid injustice is to enforce the promise

Define lack of proper form

lacks a writing

Money damages are also known as _______ damages while remedies that result in nonmonetary damages are known as _______.

legal; equitable

Damages specified in the parties' contract are known as _______ damages.

liquidated

When there is no dispute over the amount of debt or existence of debt, it is referred to as a _______.

liquidated debt.

Define a liquidated debt and its effect on finding consideration.

liquidated- no dispute unliquidated- a dispute or disagreement exists

According to the _______ rule, an acceptance is valid when the offeree places it in the mailbox, whereas a revocation is effective only when the offeree receives it.

mailbox

_______ terms in an offer and its resulting contract allow a court to determine damages in the event that one of the parties breaches the contract. They include the subject matter, price, quantity, quality, and parties.

material

The terms of an acceptance that reflect the terms of an offer are known as the _______ rule.

mirror-image

To recover damages in a breach-of-contract case, the nonbreaching party must demonstrate that she sought to _______ her damages.

mitigate

When the parties agree to discharge each other from the contract, _______ has occurred.

mutual recission

Define past consideration.

no consideration at all

In a(n) _______, the original parties and a third party all agree that the third party will replace one of the original parties and that the original party will then be discharged.

novation

When deciding whether an offeror intended to be bound by the offer, the courts use the _______ standard.

objective

A valid offer includes

offers communicated by the offeror to the offeree's agent.

For an unliquidated debt,

once the debtor pays the amount agreed on by both the parties, the debt is fully discharged.

Define the preexisting duty rule.

performance of a duty you are obligated to do under the law is not good consideration

Recall that handwritten contracts...

prevail over printed contracts if there is a conflict of terms

_______ occurs when one party makes a promise knowing the other party will rely on it, the other party does rely on it, and the only way to avoid injustice is to enforce the promise.

promissory estoppel

Identify the ways an offer can be terminated

revocation, rejection, counteroffer, death or incapacity, illegality, lapse of time

Define the common law contractual concept of mirror image rule

says the terms of the acceptance must mirror the terms of the offer. if a bilateral contract is being formed under the common law, this applies

Characterize the effect entering into an agreement with a person who is unlawfully unlicensed has on contract validity and enforceability.

states will not enforce the agreements

Define adhesion contract.

take-it-or-leave-it basis. absence of free will to enter

if multiple interpretations of a contract can be made....

the court should adopt the interpretation that makes the contract lawful, operative, definite reasonable and capable of being carried out.

requirements necessary for an "accord and satisfaction" to be enforceable

the debt is unliquidated. the debtor pays the amount he/she has agreed to pay. the creditor agrees to accept as full payment less than the creditor claims is owed.

Characterize the effect of intoxication on contract validity and enforceability.

the intoxication impairs only the intoxicated person's judgement but not their understanding of the contractual obligations

if a contract contains ambiguity....

the judge should interpret it as against the interests of the drafter of the contract

Define the Uniform Commercial Code

the national conference of commissioners on uniform state laws and the american law institute drafted a set of commercial laws that could be applicable to all states article 2 is relevant to contracts (governs contracts for the sale of goods.

Know the role of rejection in terminating a valid contract offer

the offeree can reject the offer

Know the rights of an offeror to revoke an offer

the offeror can revoke the offer at any time unless the offeree entered into an option contract with the offeror

Know whether a covenant not to compete in an employment contract is enforceable.

these instances are not unusual and are legal in most states, but they must protect a legitimate business interest.

The term _______ refers to the fact that the agreement in question is so unfair that it is void of conscience.

unconscionable

In a ________ contract, if one party's consideration is a promise, and the other party's consideration will be an act.

unilateral

In a(n) _______ debt, the parties either disagree about whether money is owed or dispute the amount.

unliquidated

When a debt is _______, the parties may enter into a(n) _______.

unliquidated; accord and satisfaction

Know Sabbath laws.

vary state to state, limit what parties can legally engage in on Sundays ; purchasing alcohol, entering into contracts,

If a person has been adjudicated insane and has a guardian appointed, any contract the person attempts to enter into is

void

As a general rule, any contract entered into by a minor is _______ by the minor until he or she _______.

voidable; reaches the age of majority or a reasonable time thereafter

objective theory of contracts

we base the existence of a contract on the parties outward manifestations of intent and base its interpretation on how a reasonable person would interpret it. what matters is how they represented intent through their actions and words