Business Law - Chapter 9.

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.

mirror image rule.

a common law rule that requires, for a valid contractual agreement, that the terms of the offeree's acceptance adhere exactly to the terms of the offeror's offer.

condition precedent

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

implied contract.

a contract formed in whole or in part from the conduct of the parties (as opposed to an express contract). also known as the implied-in-fact contract.

void contract.

a contract having no legal force or binding effect.

express contract.

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

unconscionable.

a contract or clause that is void on the basis of public policy because of one party, as result of his or her disproportionate bargaining pose, is forced to accept terms that are unfairly burdensome and that unfairly benefit the dominating party.

formal contract.

a contract that by law requires a specific form, such as being executed under seal, to be valid.

informal contract.

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

executed contract.

a contract that has been completely performed by both parties.

executory contract.

a contract that has not as of yet been fully performed.

e-contract.

a contract that is entered into cyber-space and is evidenced only by electronic impulses (such as those that make up a computer's memory), rather than for example, a typewritten form.

voidable contract.

a contract that may be legally avoided (cancelled or annulled) at the option of one of the parties.

unilateral contract.

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

valid contract.

a contract that results when elements necessary for contract formation (agreement, consideration, legal purpose, and contractual capacity) are present.

option contract.

a contract under which the offeror cannot revoke his or her offer for a stipulated time period and the offeree can accept or reject the offer during this period without fear that the offer will be made to another person. the offeree must give consideration for the option (the irrevocable offer) to be enforceable.

covenant not to compete.

a contractual promise to refrain from competing with another party for a certain period of time and within a certain geographic area. although covenants not to compete restrain trade, they commonly found in partnership agreements, business sale agreements, and employment contracts. if they are ancillary to such agreements, covenants not to compete will normally be enforced by the courts unless the time period or geographic area is deemed unreasonable.

frustration of purpose

a court-created doctrine under which a party to a contract will be relieved of his or her 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.

reformation.

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

impossibility of performance

a doctrine under which a party to a contract is relieved of his or her duty to perform when performance becomes impossible or totally impracticable (through no fault of either party).

commercial impracticability

a doctrine under which a seller may be excused from performing a contract when (1) a contingency occurs, (2) the contingency's occurrence makes performance impracticable, and (3) the nonoccurence of the contingency was a basic assumption on which the contract was made. despite the fact that UCC 2-615 expressly frees only sellers under this doctrine, courts have not distinguished between buyers and sellers in applying it.

agreement.

a meeting of two or more minds in regard to the terms of a contract. agreement is usually broken down into two events - an offer by one party to form a contract, and an acceptance of the offer by the person of whom the offer is made.

counteroffer.

an offeree's response to an offer in which the offeree rejects the original offer and at the same time makes a new offer.

tender

an unconditional offer to perform an obligation by a person who is ready, willing and able to do so.

e-signature.

as defined by the Uniform Electronic Transactions Act, "an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.

bilateral mistake

mutual misunderstanding concerning a basic assumption on which the contract was made.

third party beneficiary.

one for whose benefit a promise is made in a contract but who is not party to the contract.

past consideration.

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

voluntary consent

may be lacking because of a mistake, misrepresentation, undue influence, or duress--in other words, because there is no true "meeting of the minds".

promise.

a person's assurance that he or she will or will not do something.

condition

a possible future event, the occurrence or nonoccurence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract.

offer.

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

forum-selection clause.

a provision in a contract designating the court, jurisdiction, or tribunal that will decide any disputes arising under the contract.

rescission.

a remedy whereby a contract is cancelled and the parties are returned to the positions they occupied before the contract was made; may be effected through the mutual consent of the parties, by their conduct or by court decree.

mailbox rule.

a rule providing that an acceptance of an offer becomes effective on dispatch. acceptance takes effect, thus completing formation of the contract, at the time the offeree sends or delivers the communication via the mode expressly or impliedly authorized by the offeror.

mitigation of damages

a rule requiring a plaintiff to have done whatever was reasonable to minimize the damages caused by the defendant.

nominal damages

a small monetary award (often one dollar) granted to a plaintiff when no actual damage was suffered or when the plaintiff is unable to show such loss with sufficient certainty.

statute of frauds.

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

penalty

a sum inserted into a contract, not as a measure of compensation for its breach but rather as punishment for a default. the agreement as to the amount will not be enforced, and recovery will be limited to actual damages.

objective theory of contracts.

a theory under which the intent to form a contract will be judged by outward, objective facts (what the party said when entering into the contract, how the party acted or appeared, and the circumstances surrounding the transaction) as interpreted by a reasonable person, rather than by the party's own secret, subjective intentions.

intended beneficiary.

a third party for whose benefit a contract is formed. an intended beneficiary can sue the promisor if such a contract is breached.

bilateral contract.

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

unenforceable contract.

a valid contract rendered unenforceable by some statute or law.

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.

record.

according to the Uniform Electronic Transactions Act, information that is either inscribed on a tangible medium or stored in an electronic or other medium and that is retrievable. the Uniform Computer Information Transactions Act uses the term record instead of writing.

mutual rescission

an agreement between the parties to cancel their contract, releasing the parties from further obligations under the contract. the object of the agreement is to restore the parties to positions they would have occupied had no contract ever been formed.

click-on agreement.

an agreement that arises when a buyer, engaging in a transaction on a computer, indicates his or her assent to be bound by the terms of an offer by clicking on a button that says, for example, "i agree"; sometimes referred to as a click-on license or a click-wrap agreement.

contract.

an agreement that can be enforced in court; formed by two or more parties, each of whom agrees to perform or to return from performing some act now or in the future.

shrink-wrap agreement.

an agreement whose terms are expressed in a document located inside a box in which goods (usually software) are packaged; sometimes called a shrink-wrap license.

liquidated damages

an amount, stipulated in the contract, that the parties to a contract believe to be a reasonable estimation of the damages that will occur in the event of a breach.

anticipatory repudiation

an assertion or action by a party indicating that he or she will not perform an obligation that the party is contractually obligated to perform at a future time.

specific performance

an equitable remedy requiring the breaching party to perform as promised under the contract; usually granted only when money damages would be an inadequate remedy and the subject matter of the contract is unique (for example, real property).

waiver

an intentional, knowing relinquishment of a legal right.

usury.

charging an illegal rate of interest.

incidental damages

expenses that are caused directly by a breach of contract, such as those incurred to obtain performance from another source.

consideration.

generally, the value given in return for a promise or a performance. the consideration, which must be present to make the contract legally binding, must be something of legally sufficient value and bargained for.

unilateral mistake

made by only one of the parties. in general, does not give the mistaken party any right to relief from the contract.

performance

in contract law, the fulfillment of one's duties arising under a contract with another; the normal way of discharging one's contractual obligations.

acceptance.

in contract law, the offeree's notification to the offeror that the offeree agrees to be bound by the terms of the offeror's proposal. although historically the terms of acceptance had to be the mirror image of the terms of the offer, the Uniform Commercial Code provides that even modified terms of the offer in a definite expression of acceptance constitute a contract.

revocation.

in contract law, the withdrawal of an offer by an offeror. unless an offer is irrevocable, it can be revoked at any time prior to acceptance without liability.

consequential damages

special damages that compensate for a loss that is not direct or immediate (for example, lost profits). the special damages must have been reasonably foreseeable at the time the breach or injury occurred in order for the plaintiff to collect them.

browse-wrap terms.

terms and conditions of use that are presented to an internet user at the time certain products, such as software, are being downloaded but that need not be agreed to (by clicking "i agree" for example) before being able to install or use the product.

forbearance.

the act of refraining from exercising a legal right. an agreement between the lender and the borrower in which the lender agrees to temporarily cease requiring mortgage payments, to delay foreclosure, or to accept smaller payments than previously scheduled.

assignment.

the act of transferring to another all or part of one's rights arising under a contract.

breach of contract

the failure, without legal excuse, of a promisor to perform the obligations of a contract

contractual capacity.

the legal ability to enter into contracts. the threshold mental capacity required by law for a party who enters into a contract to be bound by that contract.

disaffirmance.

the legal avoidance, or setting aside, of a contractual obligation.

privity of contract.

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

discharge in bankruptcy

the release of a debtor from all debts that are provable, expect those specifically excepted from discharge by statute.

novation

the substitution, by agreement, of a new contract for an old one, with the rights under the old one being terminated. typically, there is a substitution of a new person who is responsible for the contract and the removal of an original party's rights and duties under the contract.

discharge

the termination of an obligation (1) in contract law, discharge occurs when the parties have fully performed their contractual obligations or when events, conduct of the parties, or operation of law releases the parties from performance. (2) in bankruptcy proceedings, the extinction of the debtor's dischargeable debts.

delegation.

the transfer of a contractual duty to a third party. the party delegating the duty (the delegator) to the third party (the delegatee) is still obliged to perform on the contract should the delegatee fail to perform.