BUS law Exam 3

Consequential Damages

Foreseeable damages that result from a party's breach of contract but are caused by special circumstances beyond the contract itself. "Special damages" When a seller fails to deliver goods, knowing that the buyer is planning to use or resell those goods immediately, a court may award these damages, the breaching party must know or have a reason to know the special circumstances will cause the nonbreaching party to suffer an additional loss

Mistakes

In certain circumstances, contract law allows a contract to be avoided on the basis of the mistake. Only a mistake of fact may allow a contract to be avoided.

Objective Theory of contract

In determining whether a contract has been formed, the element of INTENT is of PRIME importance. In contact law intent is determined by what is referred to as the objective theory of contracts. Under the theory, a party's intention to enter into a contract is judged by outward, objective facts, as interpreted by a reasonable person, rather than by the party's secret, subjective intentions. Objective facts include 1) what the party said when entering into the contract 2) how the party acted or appeared and 3) the circumstances surrounding the transaction. Intent to form a contract may be modified by conduct as well as words, oral or written.

Recovery based on quasi contract

In some situations when no actual contract exists, a court may step in to prevent one party from being unjustly enriched at the expense of another party. Quasi contract is a legal theory under which an obligation is imposed in the absence of an agreement. A quasi contract is not a true contract but rather a fictional contract that is imposed on the parties, to prevent unjust enrichment.

Necessaries

Include whatever is reasonably needed to maintain the minor's standard of living. In general, food, clothing, shelter and medical services.

Preliminary Agreement

Increasingly, the courts are holding that a agreement constitutes a binding contract if the parties have agreed on all essential terms and no disputed issues remain to resolved. If contrast, if the parties agree on a certain major terms but leave other terms open for further negotiation, a preliminary agreement is biding only in the sense that the parties have committed themselves to negotiate the undecided terms in good faith in an effort to reach a final agreement.

Valid contract

has the four elements necessary to entitle at least one of the parties to enforce it in court. 1) an agreement 2) supported by legally sufficient consideration. 3) Made by parties who have the legal capacity to enter into the contract 4) for a legal purpose.

Misrepresentation of law

ordinary does not entitle a party to be relieved of a contract.

Unconscionable Contract or Clause

A contract or clause that is void on the basis of public policy because one party was forced to accept terms that are unfairly burdensome & that unfairly benefit the other party.

Executory Contract

A contract that has not yet been fully performed by the parties. If one party has fully performed but the other has not, the contrast is said to be executed one the one side and executory on the other, but the contract is still classified as executory.

E-Contracts

A contract that is formed electronically. It must meet the same basic requirements (agreement, consideration, contractual capacity, and legality.) as paper contracts. Disputes concerning e-contracts however tend to center on contract terms and whether the parties voluntarily agreed to those terms. Online contracts may be formed not only for the sale of goods and services but also for licensing. The sale of software gently involves a license, or a right to use the software, rather than the passage of title ownership rights from the seller to the buyer.

Implied Contract

A contract that is implied from the conduct of the parties. The conduct of the parties, rather than their words, creates and defines at least some of the terms of the contract. Requirements: 1) The plaintiff furnished some service or property. 2) The plaintiff expected to be paid for that service or property and the defendant knew or should have known the payment was expected. 3) The defendant had a chance to reject the services or property and did not.

Covenant not to compete

A contractual promise of one party to refrain from conducting of one party to refrain from conducting bus similar to that of another party for a certain period of time & within a specified geographical area. Such an agreement enables the seller to sell, and the purchaser to buy, the goodwill reputation of ongoing bus without having to worry that the seller will open a competing bus a block away. Provided the restrictive covenant is reasonable & and is ancillary part of the sale of an ongoing bus, it is enforceable.

Frustration of purpose

A court created doctrine under which a party to a contract will be relieved of her or his duty to perform when the objective purpose for performance no longer exists due to reasons beyond that party's control.

Reformation

A court ordered correction of a written contract so that it reflects the true intentions of the parties.

Written contract incorrectly states the parties oral agreement

A court will also reform a contract when two parties enter into a binding oral contract but later make an error when they accept to put the terms into writing. The court will allow into evidence the correct terms of the oral contract thereby, reforming the written contract.

Condition

A qualification provision, or clause ina contractual agreement, the occurrence or nonoccurrence of which creates, suspends, or terminates the obligations of he contracting parties.

When an assignment will significantly change the risk or duties of the obligator

A right cannot be assigned if assignment will significantly alter the risks or the duties of the obligator

Collateral Promises

A secondary promise to a primary transaction such as a promise made by one person to pay the debts of another if the latter fails to perform. Must be in writing to be enforceable. Made by a third party to assume the debts or obligations of a primary party to a contract if that party does not perform.

Nominal Damages

A small monetary award often one dollar granted to a plaintiff when non actual damage was suffered.

Adhesion Contract

A standard-form contract in which the stronger party dictates the terms.

Statute of frauds

A state statute that requires certain types of contracts to be in writing to be enforceable. 1) Contracts involving interests in land 2) Contracts that cannot by their terms be performed within one year from the day after the date of formation. 3) Collateral, or secondary contracts, such as promises to answer for the debt or duty of another. 4) Promises made in consideration of marriage 5) Under the Uniform Commercial Code, contracts for the sale of goods priced at $500 or more. In an effort to prevent fraud, the statute denies enforceability to certain contracts that do not comply with its requirements.

Intended Beneficiary

A third party for whose benefit a contract is formed. An intended beneficiary can sue the promisor if the contract is breached. This type of third party beneficiary has legal rights and can sue the promiser directly for breach of the contract. Court: which party made the promise that benefits the third party.

Communication

A third requirement for an effective offer is communication the offer must be communicated to the offeree

The rule that a contract can prohibit assignments

1) A contract cannot prevent an assignment of the right to receive funds. This exception exists to encourage the free flow of funds and credit in modern bus settings. 2) The assignment of ownership rights in real estate often cannot prohibited because such a prohibition is contrary to public policy in most states. Prohibitions of this kind are called restraints against alienation. 3) The assignment of negotiable instruments such as checks and promissory notes cannot be prohibited. 4) In a contract for the sale of goods, the right to receive damages for breach of contract or payment on an account may be assigned even though the sales contract prohibits such an assignment.

Requirements Of A valid contract

1) Agreement. An agreement to form a contract includes an offer and an acceptance.. One party must offer to enter into a legal agreement, and another party must accept the terms of the offer. 2) Consideration. Any promises made by the parties must be supported by legally sufficient and bargained for consideration (something of value received or promised to convince a person to make a deal 3) Contractual capacity. Both parties entering into the contract must have the contractual capacity to do so. The law must recognize them as possessing characteristics that qualify them as competent parties. 4) Legality. The contract's purpose must be to accomplish some goal that is legal and not against public policy.

When performance is impossible

1) When a party whose personal performance is essential to the completion of the contract dies or becomes incapacitated prior to performance. 2) When the specific subject matter of the contract is destroyed. 3) When a change in the law renders performance illegal.

Offeree

A person to whom an offer is made. A contract is classified as bilateral or unilateral depending on what the offeree must do to accept the offer and bind the offeror to a contract.

Promisor

A person who makes a promise that binds the person to do or not to do a certain act

Defense to the enforceability of a contract

1. Voluntary consent. The consent of both parties must be voluntary. If a contract was formed as a result of fraud, mistake, or duress the contact may not be enforceable. 2. Form. The contract must be in whatever form the law requires. Some contracts must be in writing to be enforceable.

Offeror

A person who makes the offer

Incidental Beneficiary

A 3rd party who benefits from a contract even though the contract was not formed for that purpose. He or she has no rights in the contract and cannot sue to have it enforced.

Exculpatory Clause

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

Condition Precedent

A condition in a contract that must be met before a party's promise becomes absolute

Condition subsequent

A condition in a contract that, if it occurs, operates to terminate a party's absolute promise to perform.

Executed Contract

A contact that has been fully performed by both parties.

Not to compete/Employment Contract

A contract between an employer & an employee in which the terms & conditions of employment are stated. To be reasonable a restriction on competition must protect a legit bus interest & must not be any greater than necessary to protect the interest.

Disaffirmance within a reasonable time

A contract can ordinarily be disaffirmed at any time during minority or for a reasonable time after the minor reaches the age of majority. What constitutes a reasonable time may vary. If an individual fails to disaffirm an executed contract within a reasonable time after reaching the age of majority a court will likely hold that the contract has been ratified (made officially valid)

Penalty

A contract clause that specifies a certain amount to be paid in the event of a default or breach of contract but is unenforceable because it is designed to punish the breaching party rather than to provide a reasonable estimate of damages. Court answer 2 ?'s: 1) At the time the contract was formed, was it apparent that damages would be difficult to estimate in the event of a breach? 2_) Was the amount set as damages a reasonable estimate and not excessive? If the answers to both ?'s are yes, the provision normally will be enforced. If either answer is no the provision usually will not be enforced.

Promise

A declaration that binds a person who makes it (the promisor) to do or not to do a certain act.

Latent Defect

A defect that is not obvious or cannot readily be ascertained.

Commercial Impracticability

A doctrine that may excuse the duty to perform a contract when performance a contract when performance becomes much more difficult or costly due to forces that neither party could control or foresee at the time the contract was formed. Furthermore, the added burden of performing must not have been foreseeable by the parties when the contract was made. In one classic case: a court held that a contract could be discharged because a party would have to pay 10 times more than the original estimate to excavate a certain amount of gravel.

Impossibility of performance

A doctrine under which a party to a contract is relieved under which a party to a contract is relieved of his or her duty to perform when performance becomes objectively impossible or totally impracticable. The doctrine is applied only when the parties could not have reasonably foreseen, at the time the contract was formed, the event or events that rendered performance impossible. Objective impossibility it cannot be done, must be distinguished from subjective impossibility occurs when a party cannot deliver goods on time because of railcar shortages or cannot make payment on time because the bank is closed.

Bilateral Mistake

A mistake that occurs when both parties to a contract are mistaken about the same material fact. When this mistake occurs normally the contract is voidable by the adversely affected party and can be rescinded.

Unilateral Mistake

A mistake that occurs when one party to a contract is mistaken as a material of fact. This mistake does not give the mistaken party any right to relief from the contract. The contract normally is enforceable against the mistaken party. May not be enforceable. 1) The other party to the contract knows or should have known that a mistake of fact was made 2) The error was due to a substanial mathematical mistake in addition, subtraction, division, or multiplication, and was made inadvertently and without extreme negligence. If for instance a contractors bid was significantly low because he or she made a mistake in addition when totaling the estimated costs, any contract resulting from the bid normally may be rescinded.

Delegatee

A party to whom contractual obligations are transferred, or delegated

Assignee

A party to whom the rights under a contract are transferred or assigned.

Assignor

A party who transfers assigns his or her rights under a contract to another party the assignee

Delegator

A party who transfers delegates her or his obligations under a contract to another party the delegates.

Promisee

A person to whom a promise is made has a right to expect or demand that something either will or will not happen in the future.

Mailbox rule

Acceptance takes effect and thus completes formation of the contract, at the time offered sends or delivers the acceptance via the mode of communication expressly or impliedly authorized by the offeror. Also called the deposited acceptance rule which the majority of courts follow. Under this rule if the authorized mode of communication is the mail, than an acceptance becomes valid when it is dispatched not when it is received by the offeror. The mailbox rule does not apply to instantaneous forms of communication, such as when the parties are dealing face to face by phone, and usually by email. Under the Uniform Electronic TRANSACTIONS Act a email is considered sent when it either leaves the senders control or is received by the recipient. This rule, which takes the place of the mailbox rule, if the parties have agreed to conduct transactions electronically, allows an email acceptance to become effective when sent.

Discharged

Accomplished when both parties perform the acts promised in the contracts.

Duress

Agreement to the terms of a contract is not voluntary if one of the parties is forced into the agreement. The use of threats to force a party to enter into a contract. The use of black mail or extortion to induce consent. It is both a defense to the enforcement of a contract and a ground for recision of a contract. There must be proof of a threat to do something that the threatening party has no right to do. The threatened act must be wrongful or illegal, and it must render the person who receives the threat incapable of exercising free will. A threat to exercise a legal right, such as the right to sue someone, ordinarily does not constitute it.

A Minor's obligations on disaffirmance

All states laws permit minors to disaffirm contracts including executed contracts. Courts in most states hold that the minor need only return the goods (or other consideration) subject to the contract, provided the goods are in the minor's possession or control. Even if the minor returns damaged goods, the minor often is entitled to disaffirm the contract and obtain a refund of the purchase price. A growing number of states place an additional duty on the minor to restore adult party to the position he or she held before the contract was made. These courts may hold a minor responsible for damage, ordinary wear and tear, and depreciation of goods that the minor used prior to disaffirmance.

Formal Contract

Are contracts that require a special form or method of creation (formation) to be enforceable. Negotiable instruments, which include checks, drafts, promissory notes, and certificates of deposit. A special form and language are required to create them. Letters of credit which are frequently used in international sales contracts,

Liquidated Damages

An amount stipulated in a contract, that the parties to the contract believe to be a reasonable estimation of the damages that will occur in the event of a breach. (determined, settled, fixed)

Anticipatory Repudiation

An assertion or action by a party indicating that he or she will not perform a contractual obligation. Quite often, an anticipatory repudiation occurs when the performance of the contact would be extremely unfavorable to one of the parties because of a sharp fluctuation in market prices. When it occurs it is treated as a material breach of the contract and the non breaching party is permitted to bring an action for damages immediately, even though the scheduled time for performance under the contract may still be in the future. until the non breaching party treats this early repudiation as a breach, however the breaching party can retract the anticipatory repudiation by proper notice and restore the parties to their original obligations. It is treated as a present, material breach for two reasons 1) the non breaching party should not be required to remain ready and willing to perform when the other party has already repudiated the contract 2) the non-breaching party should have the opportunity to seek a similar contract elsewhere. Indeed, that party may have the duty to do so to minimize her or his loss.

Specific Performance

An equitable remedy in which a court orders the parties to perform as promised in the contract. This remedy normally is granted only when the legal remedy, monetary damages is inadequate. The remedy is attractive to a nonbreaching party because it provides the exact bargain promised in the contract. Moreover, the actual performance may be valuable to the promisee than the monetary damages. Monetary damages ordinarily are adequate in sales contracts because substantially identical goods can be bought or sold in the market. Only if the goods are unique will a court grant specific performance: paintings, sculptures, and rare books and coins are often unique and monetary damages will not enable a buyer to obtain substantially identical substitutes in the market

Restitution

An equitable remedy under which a person is restored to his or her original position prior to loss or injury, or placed in the position he or she would have been in had the breach not occurred. If the property or goods can be returned they must be. If the property or goods have been consumed, restitution must be made in equivalent $ amount. It may be required when a contract is rescinded, but the right to restitution is not limited to rescission cases. Because an award of restitution basically returns something to its rightful owner, a party can seek restitution in actions for breach of contract, tort actions and other types.

Agreement

An essential element for contract formation is agreement the parties must agree on the terms of the contract. Ordinarily, agreement is evidenced by two events: an offer and an acceptance. One party offers a certain bargain to another party, who then accepts the bargain.

Covenants Not to Complete

Are often included in contracts for the sale of ongoing bus and in employment contracts. The agreements restrict the area and time in which one party can directly complete with the other party. If a covenant not complete is for valid and legitimate purpose, but the area or restraints are unreasonable, some courts will reform the restraints by making them reasonable and will then enforce the entire contract as reformed. Other courts will throw out the entire restrictive covenant as illegal. Thus when businesspersons create restrictive covenants, they must make sure that the restrictions imposed are reasonable.

When the rights of an intended beneficiary vest

An intended 3rd party beneficiary cannot enforce a contract against the original parties until the 3rd party's rights have vested meaning that the rights have taken effect and cannot be taken away. Until these rights have vested, the original parties to the contract, the promisor and the promisee can modify or rescind the contract without the consent of the 3rd party. 1) When the 3rd party demonstrates express consent to the agreement, such as by sending a letter, a note, or an email acknowledging awareness of and consent to a contract formed for her or his benefit. 2) when the 3rd party materially alters his or her position in detrimental reliance on the contract, such as when a donne beneficiary contracts to have a home built in reliance on the receipt of funds promised to him or her in a donee beneficiary contract 3) When the conditions for vesting are satisfied. For instance the rights of a beneficiary under a life insurance policy vest when the insured person dies.

Promissory Estoppel

An oral contract that would otherwise be unforeseeable under the statue of frauds may be enforced under the doctrine of promissory estoppel. The promisee's reliance must have been foreseeable to the person making the promise, and enforcing the promise must be the only way to avoid injustice. Both require reasonable reliance and operate to estop, or prevent a party from claiming that no contract exists.

An Exception The main purpose rule

An oral promise to answer for the debt of another is covered by the statues of fraud unless the guarantors purpose in accepting secondary liability is to secure a personal benefit. Under the main purpose rule, this type of contract need not be in writing. The assumptions is that a court can infer from the circumstances of a case whether a leading objective of the promisor was to secure a personal benefit. Another typical application of the main purpose doctrine occurs when one creditor guarantees a debtor's debt to another creditor to forestall litigation. The purpose is to allow the debtor to remain in bus long enough to generate profits sufficient to pay both creditors. In this situation, the guaranty does not need to be in writing to be enforceable.

Tender

An unconditional offer to perform an obligation by a person who is ready, willing, and be able to do so. Therefore, a seller who places goods at the disposal of a buyer has tendered delivery and can demand payment according to the terms of the agreement. A buyer who offers to pay for goods has tendered payment and can demand delivery of the goods.

Estopped

Burned, impeded or precluded.

Browse Wrap Terms

Can occur in a transaction conducted over the internet. Browse wrap terms do not require the buyer or user to assent to the terms, before say downloading or using certain software. They are often unenforceable because they do not satisfy the agreement requirement of contract formation.

Usury

Charging an illegal rate of interest. Many states exempt corporate loans from the usury loans from the usury laws, and nearly all states allow higher interest rate loans for borrowers who could not otherwise obtain loans.

Concurrent Conditions

Conditions that must occur or be performed at the sam time they are mutually dependent. No obligations arise until these conditions are simultaneously performed.

Damages

Contract law, damages are designed to compensate the non breaching party for the loss of the bargain. Often courts, say that innocent parties are to be placed in the position they would have occupied had the contact been fully performed. 1) Compensatory to cover direct losses and costs) 2) Consequential to cover indirect and foreseeable losses. 3) Punitive to punish and deter wrongdoing 4) Nominal to recognize wrongdoing when no monetary loss is shown.

Quasi Contract

Contracts implied in law, are not actual contracts. They are not true contracts because they do not raise from any agreement, express or implied between the parties themselves. Rather they are fictional contracts that courts can impose on the parties as if the parties had entered into an actual contract. They are equitable rather than legal contracts. Usually they are imposed to avoid the unjust enrichment of one party at the expense of another.

Mentally Incompetent Persons

Contracts made by mentally incompetent persons can be void, voidable, or valid. If a court has previously determined that a person is mentally incompetent and has appointed a guardian to represent the person, any contract made by that person is void no contract exists. Only the guardian can enter into a binding contract on behalf of the mentally incompetent person. If a court has not previously judged a person to be mentally incompetent but the person was incompetent at the time the contract was formed, the contract is voidable in most states. A contract is voidable if the person did not know that he or she was entering into the contract or lacked the mental capacity to comprehend its nature, purpose, and consequences. In such situations the contract is voidable or can be ratified at the option of the mentally incompetent person but not at the option of the other party. A contract entered into by a mentally ill person whom a court has not previously declared incompetent may also be valid if the person had capacity at the time the contract was formed. Some people who are incompetent due to age or illness have lucid intervals- temporary periods of sufficient intelligence, judgment, and will.

Incidental Damages

Damages that compensate for expenses directly incurred because of a breach of contract, such as those incurred to obtain performance from another source.

Compensatory Damages

Damages that compensate the non breaching party for the loss of the bargain. These damages compensate the injured party only for damages actually sustained and proved to have arisen directly from the loss of the bargain caused by the breach of contract. They simply replace what was lost because of the wrong or damage and for this reason are often said to make the person whole.

Covent not to sue

Does not always prevent further recovery. The parties simply substitute a contractual obligation for some other type of legal action based on a valid claim.

Fraudulent Misrepresentation

Fraud is a tort, the presence of fraud also affects the authenticity of the innocent party's consent to a contract. When an innocent party is fraudulently induced to enter into a contract, the contract usually can be avoided because that party has not voluntarily consented to the terms. Normally the innocent party can either rescind the contract and be restored to her or his original position or enforce the contract and seek damages for any harms resulting from the fraud. Generally its refers only to misrepresentation that is consciously false and is intended to mislead another. That is the person, making a fraudulent misrepresentation knows or believes that the assertion is false or knows that she or he does not have a bases (stated or implied) for the assertion. fraud involves 3 elements 1) A misrepresentation of a material fact must occur 2) There must be an intent to deceive 3) the innocent party must justifiability rely on the misrepresentation. To collect damages a party must have been harmed as a result of this misrepresentation.

When the contract prohibits assignment

If a contract stipulates that the right cannot be assigned, then ordinarily it cannot be assigned. This restraint operates only against the parties themselves. It does not prohibit an assignment by operation of law, such as an assignment pursuant to bankruptcy or death. Whether an anti assignment clause is effective depends, in part, on how it is phrased. A contract that states that any assignment is void effectively prohibits any assignment.

Liquidated debts

If a debt is liquidated accord and satisfaction cannot take place. Is one whose amount has been ascertained, fixed, agreed on, settled or exactly determined.

When a statute Expressly prohibits assignment

If a statute expressly prohibits assignment, the right in question cannot be assigned.

Unilateral Contract

If the offer is phrased so that offeree can accept only by completing the contract performance. A promise for an act. The contract is formed not at the moment when promises are exchanged but rather when the contract is performed.

Bilateral Contract

If the offeree can accept simply by promising to perform, the contract is a bilateral contract. Promise for a promise. The contract comes into existence at the moment the promises are exchanged.

Release

Is a contract in which 1 party forfeits the right to pursue a legal claim against the other party. It bars any further recovery beyond the terms stated in the release. A release will generally be binding if it is made in good faith, in a signed writing required in many states, and accompanied by consideration.

Offer

Is a promise or commitment to perform or refrain from performing some specified act in the future. The party making the offer is called the offeror and the party to whom the offer is made is called the offeree. Three elements are necessary for an offer to be effective: 1) there must be a serious, objective intention by the offeror. 2) The term must be reasonably certain, or definite so that the parties and the court can ascertain the terms of the contract. 3) The offer must be communicated to the offeree. Once an effective offer has been made, the offeree's acceptance of that offer creates a legally binding contract (providing the other essential elements for a valid and enforceable contract are present.

Counteroffers

Is a rejection of the original offer and the simultaneous making of a new offer.

Acceptance

Is a voluntary act by the offeree that shows assent or agreement, to the terms of an offer. The offeree's act may consist of words or conduct. The acceptance must be unequivocal and must be communicated to the offeror. Generally, only the person to whom the offer is made or that person's agent can accept the offer and create a binding contract.

Contract

Is an agreement that can be enforced in court. It is formed by two or more parties who agree to perform or to refrain from performing some act now or in the future. Generally contract disputes arise when there is a promise of future performance.If the contractual promise is not fulfilled, the party who made it is subject to the sanctions of the court. That may be required to pay damages for failing to perform the contractual promise.

Shrink-Wrap

Is an agreement whose terms are expressed inside a box in which goods are packaged. Usually the party who opens the box is told that he or she agrees to the terms by keeping the goods. Similarity when the purchase opens a software package he or she agrees is abide by the terms of the limited licensee agreement. In most instances a shrink wrap agreement is not between a retailer and a buyer, but is between the manufacturer of the hardware or software and the ultimate buyer-user of the product. The terms generally concern warranties, remedies, and other issues associated with the use of the product.

E-Signature

Is an electronic sound, symbol, or process attached to or logically associated by a person with the intent to sign the record. Electronic documents can be signed in a number of ways. Include encrypted digital signatures, names intends as signatures, at the ends of email messages and clicks on a web page if the clicks include some means of identification.

Reformation

Is an equitable remedy used when the parties have imperfectly expressed their agreement in writing. Allows a court to rewrite the contract to reflect the parties true intentions.

Rescissions

Is essentially an action to undo, or cancel a contract. to return a nonbreaching parties to the positions that they occupied prior to the transaction. When fraud, mistake, duress, undue influence, lack of capacity, or failure of consideration is present, recision is available. Rescission may also be available by statute. The failure of one to perform under a contract entitles the other party to rescind the contract. The rescinding party must give prompt notice to the breaching party.

Record

Is info that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in visual form.

Unenforceable Contract

Is one that cannot be enforced because of certain legal defenses against it. It is not unenforceable because a party failed to satisfy a legal requirement of the contract. Rather it is a valid contract rendered uneforceable by some statue or law.

Legality

Is the fourth requirement for a valid contract to exist. For a contract to be valid and enforceable, it must be formed for a legal purpose. A contract to do something that is prohibited by federal or state statutory law is illegal & as such is void from the outset & thus unenforceable. Additionally a contract to commit a tortious act such as engage in fraudulent misrepresentation or to commit an action that is contrary to public policy is illegal & unenforceable

Rescission

Is the unmaking of a contract so as to return the parties to the positions they occupied before the contract was made. Sometimes parties rescind a contract and make a new contract at the same time. When this occurs it is often difficult to determine whether there was consideration for the new contract or whether the parties had preexisting duty, then the new contract will be invalid because there was no consideration.

When Quasi contract is used

It allows a court to act as if a contract exists when there is no actual contract or agreement between the parties. Therefore, if the parties have entered into a contract concerning the matter in controversy a court normally will not impose this contract. A court can also use the doctrine when the parties entered into a contract, but it is unforeseeable for some reason. Quasi contract recovery is often granted when one party has partially performed under a contract that is enforceable. They provide an alternative to suing for damages and allow the party to recover the reasonable value of the partial performance. Depending on the case , the amount of recovery may be measured either by the benefit received or by the detriment suffered.

Voluntary Consent

Knowledge of and genuine assent to the terms of a contract. (May be lacking because of mistake, fraudulent, misrepresentation, undue influence, or duress. Generally a party who demonstrates that he or she did not genuinely agree to the terms of a contract can choose either to carry out the contract or to cancel it and thus avoid the entire transaction.

Scienter

Knowledge on the part of a misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive.

Statutes of limitations

Limit the period during which a party can sue on a particular cause of action. After the applicable limitations period has passed a suit can no longer be brought. The period for brining lawsuits for breach of oral contracts is usually 2 to 3 years and for written contracts, 4 to 5 years. Lawsuits for breach of a contract for the sale of goods must be brought within 4 years after the cause of action has accRUED. In their original contract, the parties can agree to reduce this 4 year period to not less than one year. They cannot however agree to extend it beyond 4 years.

Void Contracts

No contract at all. None of the parties has any legal obligations if a contract is void. A contract can be void because one of the parties were previously determined by a court to be mentally incompetent for instance or because the purpose of the contract was illegal.

Breach of contract

Occurs when a party fails to perform part or all of the required duties under a contract.

Obligee

One to whom an obligation is owed

Third Party Beneficiary

One who is not a party to the contract but who stands to benefit from the contract's performance

Obligor

One who owes an obligation to another

Misrepresentation by silence

Ordinarily, neither party to a contract has a duty to come forward and disclose facts, and a contract normally will not be set aside because certain pertinent info has not been volunteered. In general if the seller knows of a serious potential problem that the buyer cannot reasonably be expected to discover the seller may have a duty to speak.

Silence as acceptance

Ordinarily, silence cannot constitute acceptance, even if the offeror states, by your silence and inaction you will be deemed to have accepted this offer. This general rule applies because an offeree should be put under a burden of liability to act affirmatively in order to reject an offer. No consideration that is nothing of value has passed to the offeree to such a liability. In some instances, however, the offeree does have a duty to speak. If so, his or her silence or inaction will operate as an acceptance. Silence may be an acceptance when an offeree takes the benefit of offered services even though he or she had n opportunity to reject them and knew that they were offered with the expectation of compensation.

Undue Influence

Persuasion that is less than actual force but more than advice and that includes a person to act according to the will of purposes of the dominating party. A contract ended into under excessive or undue influence lacks voluntary consent and is therefore voidable. One party may have an opportunity to dominate and unfairly influence another party. Minors and elderly people are often under the influence of guardians. If a guardian induces a young or elderly ward to enter into a contract that benefits the guardian, the guardian may have exerted undue influence. Attorney-client, physician-patient, guardian-ward, parent-child, husband-wife, trustee-beneficiary. There most be a clear and convincing evidence that the person did not act out of her or his free will. The existence of a fiduciary relationship alone is insufficient to provide undue influence.

Past Consideration

Promises made in return for actions or events that have already taken place are unenforceable. These promises lack consideration in that the element of bargained for exchange is missing. You can bargain for something to take place now or in the future but not for something that has already taken place.

Punitive Damages

Punitive or exemplary damages generally are not awarded in action for breach of contract. The law may compensate one party for the loss of the bargain, no more no less. When a person's actions cause both a tort and breach of contract punitive damages are available.

Mirror image rule

Requires that the offeree's acceptance match the offeror's offer exactly. If the acceptance materially changes or adds to the terms of the original offer, it will be considered not an acceptance but a counteroffer which of course need not to be accepted. The original offeror can however accept the terms of the counteroffer which of course need not be accepted.

Informal Contract

Simple contracts include all other contracts. No special form is required, except for certain types of contracts that must be in writing, The contracts are usually based on their substance rather than their form.

Shrinkwrap agreements and enforceable contract terms

Some cases, the courts have enforced the terms of shrink-wrap agreements in the same way as the terms of other contracts. These courts have reasoned that by including the terms with the product, the seller proposed a contract that the the buyer could accept by using the product after having an opportunity to read the terms. Thus, a buyers failure to object to terms contained within a shrink wrapped software package may constitute an acceptance of the terms by conduct.

Substitute Method Of Acceptance

Sometime, the offeror authorizes a particular method of acceptance, but the offeree accepts by a different means. In that situation, the acceptance may still be effective of the substituted methods serves the same purpose as the authorized means. Acceptance by a substitute method is not effective on dispatch, though. No contract will be formed until the acceptance is received by the offer.

Shrink wrap terms that may not be enforced

Sometimes, courts have refused to enforce certain terms included shrink wrap agreements because the buyer did not expressly consent to them. An important factor is when parties form their contract. Suppose that a buyer orders a product over the telephone. If the contract is formed at that time and the seller does not mention terms such as arbitration clause or a forum selection clause, clearly the buyer has not expressly agreed to these terms. If the clauses are then included in a shrink-wrap agreement, a court may conclude that those terms were only proposals for additional terms, and not part of the original contract.

Exceptions to a minor right to disaffirm

State courts and legislatures have carved out several exceptions to the minor's right to disaffirm. Some contracts, such as marriage contracts and contracts to enlist in the armed services, cannot be avoided. These exceptions are made for reasons of public policy. In addition although ordinarily minors can disaffirm contracts even when they have misrepresented their age, a growing number of states have enacted laws to prohibit disaffirmance in such situations. Other sates prohibit disaffirmance by minors who misrepresented their age while engaged in a bus as adults. Finally a minor who enters into a contract for necessaries may disaffirm the contract but remains liable for the reasonable value of the goods.

Ratification

The acceptance or confirmation of an act or agreement that gives legal force to an obligation that previously was not enforceable. A minor who has reached the age of majority can ratify a contract, expressly or impliedly. Express ratification occurs when the individual on reaching the age of majority, states orally or in writing that he or she intends to be bound by the contract. Implied ratification takes place when the minor on reaching the age of majority, behaves in a manner inconsistent with disaffirmance. If a minor fails to disaffirm a contract within a reasonable time after reaching the age of majority, then a court must determine whether the conduct constitutes implied ratification or disaffirmance. Generally, courts presume that executed contracts (fully performed) are ratified and that executor contracts (not yet fully performed by both parties) are disaffirmed.

Age of majority

The age at which a minor is recognized by law as an adult & is legally responsible for his or her actions. (18) Some states provide for the termination of minority on marriages.

Unliquidated debts

The amount of the debt is not settled, fixed, agreed on, ascertained, or determined and reasonable persons may differ over the amount owed. In these circumstances acceptance of payment of the lessor sum operates as a satisfaction, or discharge, of the debt because there is valid consideration. The parties give up a legal right to contest the amount in dispute.

Contractual Capacity

The capacity required by the law for a party who enters into a contract to be bound by the contract. Courts generally presume the existence of contractual capacity, but in some situations, capacity is lacking or may be ?able

Click On Agreement

The courts have concluded that the act of clicking on a box labeled I accept or I agree can indicate acceptance of an online offer. The agreement resulting from such acceptance. Generally the law does not require that the parties read all of the terms in a contract for it be effective.Therefore clicking on a box that states I agree to certain terms can be enough to bind a party to these terms. The terms may be contained on a website through which the buyer is obtaining goods and services, or they may appear on the screen of a computer, smartphone, or other device the software is downloaded from the internet.

Breach of contract

The failure, without legal excuse of a promisor to perform the obligations of a contract. If there is a material breach, the non breaching party is excused from the performance of contractual duties and can sue for damages caused by the breach. If the breach is minor (not material) the non breaching party's duty to perform may sometimes be suspended until the breach is remedied, but the duty is not entirely excused. Once the minor breach is cured (corrected) the non breaching party must resume performance of the contractual obligations. Any breach entitles the non breaching party to sue for damages, but only a material breach discharges the non breaching party from the contract. The policy underlying these rules is that contracts should go forward when only minor problems occur, but that contracts should be terminated if major problems arise.

The Fact ACT

The fair and accurate credit transactions act combat identity theft. Involves how credit card receipts should be handled. Merchants may print only the last five digits of a credit or debit card and may not print the cards expiration date any receipts provided to the cardholder at the point of sale. Only applies to receipts that are electronically printed.

Performance

The fulfillment of one's duties under a contract the normal way of discharging one's contractual obligations.

Disaffirmance

The legal avoidance or setting aside of a contractual obligation. To disaffirm a minor must express through words or conduct, his or intent not to be bound to the contract. The minor must disaffirm the entire contract, not a merely portion of it. An adult who enters into a contract with a minor cannot avoid his or her contractual duties on the ground that the minor could do so. Unless the minor exercises the option to disaffirm the contract, the adult party, normally is bound by it.

Construction Contracts

The measure of damages in a building or construction contract depends on which party breaches and when the breach occurs. If the owner breaches before performance, has begun the contractor can recover only the profits that would have been made on the contract, that is the total contract price less the cost of materials and labor. If the owner breaches during performance, the contractor can recover the profits plus the costs incurred in partially constructing the building. If the owner breaches after the construction has been completed, the contractor can recover the entire contract price plus interest. When the contractor breaches the construction contract, the measure of damages is the cost of completion, which includes reasonable compensation for any delay in performance. If the contractor finishes late, the measure of damages is the loss of use.

Discharge by accord and satisfaction

The parties agree to accept performance different from the performance originally promised.. An accord is a contract to perform some act to satisfy an existing contractual duty that has not yet been discharged. A satisfaction is the performance of the accord agreement. An accord and its satisfaction discharge the original contractual obligation. Once the accord has been made the original obligation is merely suspend until the accord agreement is fully performed. If it id not performed the party to whom performance is owed can bring an action on the original or for breach of the accord.

The requirements of quasi contract

The party seeking recovery must show the following: 1) The party conferred a benefit on the other party 2) The party conferred the benefit with the reasonable expectation of being paid 3) The party did not act as a volunteer in conferring the benefit 4) The party receiving the benefit would be unjustly enriched id allowed to retain the benefit without paying for it.

Privity of contract

The relationship that exists between the promisor and the promisee of a contract.

Mitigation of Damages

The requirement that a plaintiff do whatever is reasonable to minimize the damages caused by the defendant's breach of contract. Some states require a landlord to use reasonable means to find a new tenant if a tenant abandons the premises and fails to pay rent. If an acceptable tenant becomes available the landlord is required to lease the premises to this tenant to decrease the damages, recoverable from the former tenant.

Definitness

The second requirement for an effective offer involves the definiteness of its terms. An offer must have reasonably definite terms so that a court can determine if a breach has occurred and give an appropriate remedy. The specific terms required depend of course on the type of contract. Generally, a contract must include the following terms, either expressed in the contract or capable of being reasonably inferred from it: 1) the identification of the parties 2) the identification of the object or subject matter of the contract also the quantity, when appropriate including the work to be performed with specific identification of such items as goods, services, and land. 3) The consideration to be paid 4) The time of payment, delivery or performance. An offer may invite an acceptance to be worded in such specific terms that the contract is made definite.

Novation

The substitution by agreement of a new contract for an old one, with the rights under the old one bring terminated. Essentially the parties to the original contract and one or more new parties get together and agree to the substitution. 1) A previous valid obligation 2) An agreement by all of the parties to a new contract 3) The extinguishing of the old obligation discharge of the prior party 4) A new valid contract A motivation expressly or impliedly revokes an discharges a prior contract. The parties involved may expressly state in the new contract that the old contract, is now discharged. If the parties do not expressly discharge the old contract, it will be impliedly discharged if the new contracts terms are inconsistent with the olds terms.

Discharge

The terminate of an obligation, such as occurs when the parties to a contract have fully performed their contractual obligations.

Express contact

The terms of the agreement are fully and explicitly stated in words, oral or written. A signed lease for an apartment or a house is an express written contract.

Alienation

The transfer of title to real property which alienates the real property from the former owner.

Delegation Duties

The transfer to another of a contractual duty. No special form is required to create a valid delegation of duties. As long as the delegator expresses an intention to make the delegation, it is effective. The delegator need not even use the word delegate.

Assignment

The transfer to another of all or part of one's rights arising under a contract. Often used in bus financing.

Consideration

Usually is defined as the value give in return for a promise. 1) something of legally sufficient value must be given in exchange for the promise 2) there must be a bargained for exchange.

Partial performance

When a contract has been primarily performed and the parties cannot be returned to their positions prior to the contract's formation, a court may grant specific performance. Specific performance is an equitable remedy that requires that a contract be performed according to its precise terms. The parties still must prove that an oral contract existed, of course. In cases involving oral contracts for the transfer of interests in land, courts usually look at whether justice is better served by enforcing the oral contract when partial performance has taken place. In some states mere reliance on certain types of oral contracts is enough to remove them from the statute of frauds. Under the UCC, an oral contract for goods priced $500 or more is from the statutes of fraud.

When a contract is personal in nature

When a contract is for personal services the rights under the contract normally cannot be assigned unless all that remains is a monetary payment.

Complete Performance

When a party performs exactly as agreed, there is no ?'s as to whether contract has been performed. When a party's performance is perfect, it is said to be complete. Normally conditions expressly stated in the contract must fully occur in all aspects for complete performance strict performance of the contract to take place. Any deviation breaches the contract and discharges the other party's obligations to perform. For instance most construction contracts require the builder to meet certain specifications. If the specifications are conditions, complete performance is required to avoid material breach. If the conditions are met, the other party to the contract must then fulfill her or his obligation to pay the builder.

Quantum Meruit

When the court imposes a quasi contract a plaintiff may recover as much as he or she deserves. It essentially describes the extent of compensation owed under a quasi contract. Although quasi contracts exist to prevent unjust enrichment, in some situations the party who obtains a benefit is not liable for its fair value. A party who has conferred a benefit on someone else unnecessarily or as a result of misconduct or negligence cannot invoke the doctrine of quasi contract.

Duties that cannot be delegated

When the duties are personal in nature: When special trust has been placed in the obligor or when performance depends on the obligor's personal skill, or talents, contractual duties cannot be delegated. When performance by a 3rd party will vary materially from that expected by the obligee: When performance by a third party will vary materially from that expected by the obligee under the contract, contractual duties cannot be delegated. When the contract prohibits delegation: When the contract expressly prohibits delegation by including an anti delegation clause the duties cannot be delegated.

Accord and satisfaction

a debtor offers to pay, and a creditor accepts, a lesser amount than the creditor originally claimed was owed. The accord is the agreement. In the accord one party undertakes to give or problem, and the other to accept in satisfaction of a claim, something other than that on which the parties originally agreed. Satisfaction is the performance, usually payment that takes place after the accord is executed. A basic rule governing such agreements is that there can be no satisfaction to occur, the amount of the debt must be in dispute.

Doctrine Promissory Estoppel

also called detrimental reliance a person who has reasonably and substantially relied on the promise of another can obtain some measure of recovery. Allows a party to recover on a promise even though it was made without consideration. Under this doctrine, a court may enforce an otherwise promise to avoid an injustice that would otherwise result. For the doctrine to be applied the following elements are required: 1) There must be a clear and definite promise 2) The promisor should have expected that the promisee would rely on the promise. 3) The promisee's reasonably relied on the promise by acting or refraining from some act. 4) The promisee's reliance was definite and resulted in substantial detriment, 5) Enforcement of the promise is necessary to avoid injustice. If these requirements are met, a promise may be enforced even though it is not supported by consideration. In essence the promisor the offeror will be estopped barred or prevented from asserting lack of consideration as a defense. Is similar in some ways to the doctrine quasi contract. In both situations a court is acting in the interests of equity and imposes contract obligations on the parties to prevent unfairness even though no actual contract exists. The difference is that with quasi contract, no promise was made at all. In contrast with promissory estoppel a promise was made and relied on but it was unenforceable.

Exceptions to the rule of privity of contract

assignments, delegations, and third party beneficiary contracts

When courts will enforce exculpatory clauses

courts do enforce these clauses if they are reasonable, do not violate public policy, and do not protect parties from liability for intentional misconduct. The language used must not be ambiguous and the parties must have been relatively equal bargaining positions. bus such as health clubs, racetracks, amusement parks, skiing facilities horse rental operations, golf cart concessions, and skydiving organizations frequently use this to limit their liability for patrons injuries. Courts also may enforce reasonable exculpatory clauses in loan documents, real estate contracts, and trust agreements.