LEGS Exam Two

Exceptions to the preexisting duty rule:

(i) unforeseen circumstances; (ii) additional work; and (iii) UCC-sale of goods.

For a court to enforce a promise, who must offer consideration?

Both sides If one side does not offer valid consideration, it means that no consideration exists

Express contract

In writing or words

Contract

Legally enforceable promises

Illusory promise

No promise at all. Not a valid consideration.

How often do courts weigh whether or not you made a good bargain?

Seldom The courts seldom considers adequacy of consideration.

Intent

The intended purpose or goal of an action, especially in a contract.

A contract where the powerful party dictates the terms of the agreement and eliminates the other party's free will are considered __________.

unconscionable

Offer

A key factor in the agreement element of a contract; consists of the terms and conditions set by one party, the offeror, and presented to another party, the offeree.

Bilateral Contract

A promise exchanged for a promise

Unilateral Contract

A promise exchanged for an act. Most common form is a reward.

Contract

A promise or 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. Legally enforceable promises

Promising to stop smoking for a week is an example of what type of consideration?

A promise to refrain from doing something

Unforeseen circumstances

Events that a reasonable person would be expected to anticipate

What degree of trust generally exists when a party is able to unduly influence another party?

High

If a contract is deemed unenforceable, what remedy is available to the parties?

None No remedy is available for an unenforceable agreement.

For a mutual mistake to interfere with legal consent, it must involve all the following:

1. A basic assumption about the subject matter of the contract. 2. A material effect on the agreement. 3. An adverse effect on a party that did not agree to bear the risk of mistake at the time of the agreement. Courts usually to not interfere if the mistake is regarding the value of an item in question.

Letter of credit

A binding document that a buyer can request from a bank to guarantee that the payment for goods will be made to the seller.

Which of the following is true of a mutual mistake?

A contract entered into based on mutual mistake can be rescinded by either party

Unconscionable contract

A contract in which one party has so much more bargaining power than the other party that the powerful party dictates the terms of the agreement and eliminates the other party's free will.

Implied Contracts

A contract that arises not from words of agreement but from the conduct of the parties.

Contract under seal

A contract that has a seal certifying its legality. Such contracts require no consideration for them to be legal.

Formal Contract

A contract that must have a special form or must be created in a specific manner.

Quasi-contract

A court-imposed contractual obligation to prevent unjust enrichment. Something that the courts use in absence of a contract to avoid a party being unjustly enriched (getting a benefit of something they don't deserve) Something that the courts use in absence of a contract to avoid a party being unjustly enriched (getting a benefit of something they don't deserve)

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.

Acceptance

A key factor in the agreement element of a contract; consists of the agreement of one party, the offeree, to the terms of the offer in the contract made by the other party, the offeror.

Legal object

A purpose that does not violate a statute or public policy

Illusory Promise

A situation in which a party appears to commit to something but really has not committed to anything. It is not a promise and thus not consideration.

Executory

A term applied to a contract in which not all the terms have been fully performed. If one or both parties has something left to do in order to complete what they agreed to do

Valid contract

A term applied to a contract that includes all four elements of a contract: agreement (offer and acceptance), consideration, contractual capacity, and legal object.

Void contract

A term applied to a contract that is not valid because its object is illegal or it has some defect that is so serious that it is not a contract.

Unenforceable

A term applied to a contract that, because of a law, cannot be enforced by the courts.

Negotiable instrument

A written document signed by a person who makes an unconditional promise to pay a specific sum of money on demand or at a certain time to the holder of the instrument; an acceptable medium for exchanging value from one person to another.

Which of the following is an exception to the preexisting duty rule?

Additional work

Tow the Line Towing Company, Inc. creates contracts with its clients that are presented on a "take-it-or-leave-it" basis. Courts typically find these types of agreements to be _____.

Adhesion contracts

A legally binding contract requires four elements which are...

Agreement, consideration, capacity, and legal object

Technically, minors can disaffirm contracts for necessaries, but they will still be held liable for the reasonable value of the necessary. Which of the following is generally an example of a necessary?

All of these (Medical services, shelter, clothing, food)

Option Contract

An agreement whereby the offeree gives the offeror a piece of consideration in exchange for the offeror's agreement to hold the offer open for the specified period of time.

Accord and satisfaction

An arrangement between contracting parties whereby one of the parties substitutes a different performance for his or her original duty under the contract.

Implied ratification

An implied ratification occurs when the former minor takes some action after reaching the age of majority that is consistent with an intent to ratify the contract.

Recognizance

An obligation in which a party acknowledges in court that he or she will perform some specified act and/or pay a price on failure to do so.

Which Article of the UCC governs contracts for the sale of goods?

Article 2

Implied contract

Based on how you act

Fraudulent misrepresentation

Consciously false representation of a material fact intended to mislead the other party

Adhesion contract

Contract created by a party to an agreement that is presented to the other party on a take-it-or-leave-it-basis. The contract is presented as complete and as the only chance the presented party, known as the adhering party, will have to enter into the agreement.

Bob is hired to do computer sales for an electronics store. He agrees that if he leaves his employment, he will not work for another computer store within twenty-five miles for a period of two years. This type of agreement is called a(n) _____.

Covenant not to compete

Unliquidated debt

Debt for which the parties either dispute the fact that any money is owed or agree that some money is owed but dispute the amount.

Liquidated debt

Debt for which there is no dispute between the parties about the fact that money is owed and the amount of money owed.

Which of the following is a much more visible and active inference with free will than undue influence?

Duress

Legal Object

For the contract to be enforceable, is cannot be either illegal or against public policy.

On the streets of New York, a man sells you a pocket watch for $20. He says all the watch needs is a new battery and it will be just like new and work perfectly. You buy a new battery for the watch, but the watch still does not work. The man selling the watch knew that the watch would not work, even with a new battery, but he told you it would anyway. The above scenario is an example of what?

Fraudulent misrepresentation

Suppose Markus offers to sell Zara his surfboard for $200. Zara responds, "I'll look at it on the weekend, and if I like it, I'll pay you." At this point, Zara has not committed to doing anything. The law considers this a(n) ________________.

Illusory promise

Elements of fraudulent misrepresentation

Justifiable reliance on the false statement by the innocent party. A false statement about a material fact of the contract. Intent to decieve.

Proper form

Lacks a writing. Certain contracts require writing and if there is none, the agreement will not be enforced.

Suppose Joey and Mikey enter into a contract together. Joey says he will pay Mikey $100,000 to kill one of Joey's enemies. Both parties know this contract involves the undertaking of an illegal act. Under which element of a contract is this contract not enforceable?

Legal Object

Which of the following elements is not necessarily required for a legally binding contract?

Money is exchanged

To be emancipated, minors can...

Move out of their parents house and support themselves, petition the court for a declaration of emancipation, or get married

Which of the following will not emancipate a minor?

Moving out of the house but still getting support from parents

How do you form an contract?

Must have an agreement, must have consideration, must have capacity, legal object

Suppose an operator of a weight scale certifies the weight of a good that is for sale. However, the accuracy of the scale used to weigh the good has not been checked in more than four years, even though the weight scale operator could have easily checked the accuracy of the scale. The scale gave an improper weight measurement that resulted in many problems with the shipping and sale of the product. The above scenario is an example of what?

Negligent misrepresentation He could have discovered the truth using reasonable care by calibrating the accuracy of the scale

Frank works as a cellphone salesman. He has worked at the same company for the past two years, and one day his boss approaches him with good news. He says because Frank has sold so many phones lately, he is going to give Frank a $500 bonus. Three weeks later, Frank has still not received the bonus. Can Frank sue his boss to enforce the promise?

No, this is an example of past consideration. A promise cannot be based on consideration provided before the promise was made. Frank is at the mercy of his boss' goodwill because past consideration is no consideration at all.

Elements of a valid offer

Offeror's intent to be bound Definite and certian terms Communication of offer to offeree

Agreement

One of the four elements necessary for a contract; consists of an offer made by one party, the offeror, and the acceptance of the offer by another party, the offeree.

Voidable Contract

One or both parties have the ability to either withdraw from or enforce.

A pool lifeguard demands money after saving Bob from drowning in the pool. Bob does not have to pay the lifeguard because this is an instance of __________.

Preexisting duty

Bilateral

Promise in exchange for a promise Most contracts are bilateral They become binding when the promise is exchanged

Unilateral

Promise in exchange for an act The contract is binding when the performance or act happens

In which of the following instances can injustice be avoided by carrying out the promise?

Promissory estoppel

If the offer is for a unilateral contract, the offeree can accept only by __________________.

Providing the requested performance

If Bill offered to pay $500 to anyone who returned his lost dog to him, Mary could accept the offer only by _______________.

Returning the dog Unilateral contract

Hillary and Dillon enter into a contract whereby Hillary, seventeen (17) years old, purchases a computer and printer from Dillon. Dillon agrees to finance the contract and allows Hillary to pay $100 per month. When Hillary turns eighteen (18) years old, what must she do to ratify the contract?

She can ratify the contract by continuing to pay $100 per month with no other requirement

Consideration

The bargained-for exchange; what each party gets in exchange for his or her promise under a contract. What a person will receive in return for performing a contract obligation

Adequacy of consideration

The court does not weigh whether you made a good bargain

Contractual Capacity

The legal ability to enter into a binding agreement.

Promissory estoppel

The legal enforcement of an otherwise unenforceable contract due to a party's detrimental reliance on the contract.

A unilateral contract may be rescinded if:

The mistake was caused by a clerical error that did not result from gross negligence.

Which one of the following conditions does not generally exist for a mutual mistake to interfere with legal consent?

The mutual mistake is a mistake of value.

Incapacity

The possession of a mental or physical defect that prevents a natural person from being able to enter into a legally binding contract.

Mailbox rule

The principle that holds that an acceptance is valid when it is placed in the mailbox, whereas a revocation is effective only when received by the offeree. In some jurisdictions, the mailbox rule has been expanded to faxes.

Mirror-image rule

The principle that holds that the terms of the acceptance must mirror the terms of the offer; if the terms of the acceptance do not mirror that terms of the offer, no contract is formed, and the attempted acceptance is a counteroffer.

Uniform Commercial Code (UCC)

The statutory source of contract law in the United States applicable to transactions involving the sale of goods. The UCC was created in 1952 and adopted by all 50 states, the District of Columbia, and the Virgin Islands; it may be modified by each state to reflect the wishes of the state legislature.

An offer immediately terminates if the offeror dies or loses the legal capacity to enter into the contract.

True

If the sober party is aware that the intoxicated person is so impaired that he is unable to understand his legal obligations under the contract he is entering into, then this type of contract is voidable.

True

In cases where both parties to a contract are mistaken about either a current or a past material fact, either party can choose to rescind the contract.

True

The offer immediately terminates if the offer states that it will be held open only for a certain amount of time and that time expires.

True

The offer immediately terminates if the subject matter of the offer is destroyed or becomes illegal.

True

Undue influence can arise when parties have a relationship involving a high degree of trust.

True

Taking advantage of one's dominant position in a relationship to unduly persuade the other party is known as __________.

Undue influence

UCC

Uniform Commercial Code Article two governs commercial transactions for the purchase of goods

This type of contract is not a contract because either its object is illegal or it has a serious defect.

Void Contract

After a football game, Tyler and Austin want to enter into a contract together. Tyler is completely sober, but he knows Austin is very intoxicated and is so impaired that he is unable to understand the terms of the contract. If they enter into a contract, the contract would be ________.

Voidable

Executed

When all the terms of the contract have been fully performed

Promissory Estoppel

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.

Duress

When one party was forced into the agreement by the wrongful act of another

A substantive unconscionable contract contains conditions that:

are one-sided

Substantive unconscionably...

derives from one-sided, unjust, or overly harsh substance in a contract

Once all the terms of the contract have been fully performed, the contract has been _________. As long as some of the terms have not yet been performed, the contract is ________.

executed; executory

A promise to do something that you are already obligated to do is __________ consideration.

insufficient If you promise to do your court ordered community service, it is insufficient consideration because you are already obligated to do it.

An offer immediately terminates in all of the following situations, except:

manifestation of intent to be bound.

Consideration must be __________.

the product of a bargained for exchange

The mirror-image rule says that the terms of the acceptance must mirror _________.

the terms of the offer if not, no contract is formed.