Business Law Midterm Essay Questions

What rules guide the courts in interpreting contracts?

1) A word will be given its ordinary, commonly accepted meaning, and a technical word or term will be given its technical meaning, unless the parties clearly intended something else. 2) Because a contract should be drafted in clear and unambiguous language, a party that uses ambiguous expressions is held to be responsible for the ambiguities. Thus, when the language has more than one meaning, it will be interpreted against the party that drafted the contract. 3) Evidence of trade usage, prior dealing, and course of performance may be admitted to clarify the meaning of an ambiguously worded contract.

What are the elements that are necessary for an effective acceptance?

1) Equivocal Acceptance: everything in the offer must be clear. There should be no doubt. 2) Silence Acceptance: can be acceptance when offeror has had prior dealing with the offeree and doesn't need to be verbal to agree. 3) Communication of Acceptance: Bilateral contracts need communication for acceptance because they are a promise for a promise. Whereas unilateral contracts are promise for a performance so once the performance by the offeree is completes, that is an acceptance. 4) Mode and Timeliness: Acceptance goes into effect once the offeree has sent or delivered the acceptance via form of communication (mailbox rule).

What are the six basic elements necessary to the formation of a valid contract?

1) Offer and Acceptance: To contract on certain terms by the offeror to the offeree and an indication by the offeree of acceptance to those terms. 2) Agreement: When two or more parties decide to perform or refrain from an act now or in the future. 3) Consideration: Something of value received or promised to convince a person to make a deal. 4) Contractual Capacity: The law must see both parties possessing of qualities that qualify them as competent. 5) Legality: Contract's purpose must accomplish something that is legal and not against public policy. 6) Staute of Frauds: certain kinds of contracts be memorialized in a writing, signed by the party to be charged, with sufficient content to evidence the contract.

What elements are necessary for an effective offer? What are some examples of non offers?

1) Offeror must have serious intention 2) Terms of offer must be reasonably certain so that both parties can understand them. This means that object or action in contract is clearly defined and time of performance is stated. 3) The offer must be communicated to the offeree.

What is required for consideration to be legally sufficient?

1) a promise to do something that one has no prior legal duty to do (ex. to pay a receipt of certain goods) 2) The performance of an action that one is otherwise not obligated to undertake (ex. providing accounting services) 3) The refraining from an action that one has a legal right to undertake (called forbearance)

What are some examples of contracts that lack consideration?

1) preexisting duty: a promise to do what one already has a legal duty to do. Ex. fireman can't claim reward for putting out a fire. 2) Past consideration: Promises made in return for actions or events that have already taken place are not enforceable. Past consideration=no consideration. 3) Illusory Promises: if the terms of the contract express such uncertainty of performance that the promisor has not definitely promised to do anything, this is illusory ex. you all will get a 10% raise if the boss says it's ok

What is a contract? What is the objective theory of contracts?

A contract is a set of promises constituting an agreement between parties who agree to perform or to refrain from performing some act now or in the future. Objective theory of contracts is the view that contracting parties shall only be bound by terms that can be objectively inferred from promises made.

How does a void contract differ from a voidable contract? What is an unenforceable contract?

A void contract is not a contract at all whereas a voidable contract is when either one or both parties decided to avoid any duty to perform or to ratify the contract. An unenforceable contract is when a valid contract is rendered unenforceable by statute or law.

What is the difference between express and implied contracts?

An express contract is a contract in which the terms of the agreement are stated in words, are spoken or written down. An example of an express contract is a signed lease for an apartment because it's a written contract. An implied contract is a contract formed in whole or in part from the conduct of the parties.

In what circumstance is an offer irrevocable?

An option contract is an irrevocable offer because the offeror cannot revoke the offer for a specific time period because the offeror has given consideration for the offer to remain open.

In what circumstances might a promise be enforced despite a lack of consideration?

Under promissory estoppel, a person who has reasonably and substantially relied on the promise of another can obtain some measure of recovery. Requirements to establish promissory estoppel are.... 1) there must be a clear and definite promise 2) promisor should have expected that the promisee would rely on the promise 3) The promisee 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

What is an accord and satisfaction?

a debtor offers to pay, and a creditor accepts, a lesser amount than the creditor originally claimed was owed. Accord: is the agreement. one party undertakes to give or perform while the other to accept Satisfaction: Performance (usually payment) that takes place after the accord is executed. Accord Satisfaction occurs when there is no money paid up front--if money paid upfront, there is no accord satisfaction