Business Law Chapters 11-15

Your friend made the following statement: "I might sell my car next month if I can get a good price." This statement is a. an offer to a formal contract. b. an offer to a unilateral contract. c. an offer to a bilateral contract. d. not an offer.

not an offer

Which of the following statements most likely would not be considered a counteroffer? a. "I accept, but only if you also include a CD player." b. "I accept, but please ship the merchandise to my home rather than my place of business." c. "I accept, but only if you give me thirty days to pay." d. "I accept, but only if you give me a discount."15.

"I accept, but please ship the merchandise to my home rather than my place of business."

Promissory Estoppel (detrimental reliance)

A doctrine that applies when a promisor makes a clear and definite promise on which the promisee justifiably relies; such a promise is binding if justice will be better served by the enforcement of the promise.

Promisee

A person to whom a promise is made.

Offeree

A person to whom an offer is made.

Promisor

A person who makes a promise.

Offeror

A person who makes an offer.

Promise

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

Offer

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

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.

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.

Partnering agreement

An agreement between a seller and a buyer who frequently do business with each other on the terms and conditions that will apply to all subsequently formed electronic contracts.

Contract

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

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.

Option-to-Cancel Clauses

If promisor has option to cancel contract BEFORE performance has begun, promise is illusory

Promissory Estoppel and Quasi Contracts

In both cases, court, acting in interests of equity, imposes contract obligations on parties to prevent unfairness even though no actual contract exists

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.

Legally Sufficient Value

May consist of following: 1. Promise to do something no one has prior legal duty to do 2. Performance of action one not otherwise obligated to do 3. Forbearing from action one has legal right to undertake

negligent misrepresentation

Negligent misrepresentation at common law occurs when the defendant carelessly makes a representation while having no reasonable basis to believe it to be true.

Covenant not to Sue

Parties substitute a contractual obligation for some other type of legal action based on a valid claim.

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.

disaffirmace

The act by which a person who has entered into a voidable contract; as, for example, an infant, does disagree to such contract, and declares he will not abide by it.

emancipation

The act or process by which a person is liberated from the authority and control of another person.

contractual capacity

The legal capability to form a binding contract. A number of classes of people lack contractual capacity, and these include minors, the mentally challenged, those under the influence of an intoxicating substance and incarcerated convicts

necessaries

Things indispensable, or things proper and useful, for the sustenance of human life.

unconscionable

Unusually harsh and shocking to the conscience; that which is so grossly unfair that a court will proscribe it.

voluntary consent

Voluntary Acquiescence to the proposal of another; the act or result of reaching an accord; a concurrence of minds; actual willingness that an act or an infringement of an interest shall occur.

Altier orally promised his daughter a silver bracelet as a gift. Altier is not legally bound because a. a promise to make a gift is unenforceable. b. he never intended to give the gift. c. the consideration was inadequate. d. the gift was too expensive.

a promise to make a gift is unenforceable.

reformation

a remedy utilized by the courts to correct a written instrument so that it conforms to the original intent of the parties to such an instrument

adhesion contract

a type of contract, a legally binding agreement between two parties to do a certain thing in which one side has all the bargaining power and uses it to write the contract primarily to his or her advantaged

Lee owes Chaney $450. Both Lee and Chaney agree on the amount owed. The debt will be discharged if Chaney a. accepts $300 and a set of books worth $125 from Lee. b. accepts $375 in full payment. c. accepts $400 in full payment. d. orally agrees to cancel the debt.

accepts $300 and a set of books worth $125 from Lee.

Unliquidated Debt

amount of debt is NOT settled, fixed, agreed upon; acceptance of lesser sum serves as satisfaction/discharge of debt

Unless stated otherwise, acceptance of an offer made by mail takes place as soon as the letter of acceptance isa. written by the offeree.b. mailed by the offeree.c. received by the offerer.d. received by the offeree.

b

If either party fails to perform her or his duties under the terms of a contract, the contract has been a. performed. b. breached. c. enforced. d. executed.

breached

Requirements Contract

buyer will purchase from seller all of goods of designated type that buyer requires

Output Contract

buyer will purchase from seller all of seller's output

To create a legally binding contract, both parties to the agreement must be a. able to read and write. b. able to speak and understand English. c. financially responsible. d. competent.

comptent

Release

contract in which one party forfeits right to pursue legal claim against other party; bars further recovery beyond terms stated in release

If no fixed time is stated for an offer to remain open, the offer a. ends automatically after thirty days. b. ends after a reasonable time. c. ends when the offeree states that it has ended. d. remains open indefinitely.

ends after a reasonable time

Past Consideration

equivalent to no consideration; cannot bargain for something that has already occurred

Bart agreed to sell Sean his motorcycle for $1500. Sean paid Bart $1500, and Bart promised delivery the next day. This is an example of a(n) a. implied contract. b. executed contract. c. executory contract. d. void contract.

executory contract

Carlson fully performed her part of a contract to the complete satisfaction of Briggs, who has not yet paid Carlson. This is an example of a(n) a. executory contract. b. executed contract. c. formal contract. d. void contract

executory contract

Allen repaired Hansen's house while Hansen was sick. When she found out about the repairs, Hansen promised to pay Allen $50. Hansen's promise is not enforceable in a court of law because it was a. not adequate. b. for past consideration. c. for future consideration. d. too indefinite.

for past consideration

McIntyre was struck by a car driven by Gaines, who orally promised McIntyre $1,500 if she would not bring suit for injuries. McIntyre agreed. McIntyre a. has made a void agreement. b. is entitled only to actual expenses. c. has no rights because she gave no consideration for Gaines's promise. d. has a right to $1,500 because she refrained from doing what she had a legal right to do.

has a right to $1,500 because she refrained from doing what she had a legal right to do.

scienter

knowledge of wrongness of an act or the danger of a situation. A person with scienter may be held legally liable in criminal or civil cases

An agreement is unenforceable because of lack of consideration when a. consideration is inadequate. b. consideration is not in the form of money. c. a person gives up his or her legal rights. d. no promise is given or act completed for the offeror's promise.

no promise is given or act completed for the offeror's promise

An example of a valid offer is a(n) a. notice of a reward for finding a lost dog. b. advertisement to sell a car. c. offer that is made in jest. d. offer to sell a stolen stereo.

notice of a reward for finding a lost dog

The Budget Office Furniture Company advertised a 60- x 30-inch executive desk for $220.99 in its office supplies catalog. Marlow went to the store and told the salesperson that she wanted to buy one of the advertised desks. Marlow's action was a(n) a. agreement. b. acceptance. c. offer. d. bilateral contract.

offer

A person who makes a counteroffer becomes the a. acceptor. b. offeree. c. offerer. d. promisee.

offerer

Liquidated Debt

one whose amount has been ascertained, fixed, agreed on; acceptance of lesser sum than entire amt of liquidated debt is NOT satisfaction, balance still legally owed

If Stornelli pays Mooney $50 to keep an offer for the sale of a personal computer open for a definite length of time, their agreement is called a(n) a. counteroffer. b. option. c. breach. d. quasi contract.

option

After Buckman found Conrad's wallet, Conrad orally promised to pay Buckman $15. Conrad is not legally bound to pay because the consideration for her promise was a. present. b. past. c. future. d. illegal.

past

Executory (contract)

performance established in that remains to be carried out

A bilateral contract involves a(n) a. act for an act. b. act for a promise. c. promise for a promise. d. promise for an act.

promise for a promise

Preexisting Duty

promise to do what one already has legal duty to do does not constitute legally sufficient consideration

Another name for a contract implied in law is a(n) a. executed contract. b. written contract. c. quasi contract. d. express contract.

quasi contract

latent defects

real property defects not discover able by reasonable and customary inspection. If known to the seller or to the real estate broker representing the seller, then each of them has an obligation to reveal such defects to a prospective buyer

Forbearance

refraining form an action that one has legal right to undertake

Preston offered to sell a camera to Bellino but then withdrew the offer before Bellino could accept. Preston's withdrawal of the offer is known as a. revocation. b. an option. c. a counteroffer. d. acceptance.

revocation

When a debtor and a creditor disagree on the amount owed on a debt and agree to compromise, the debt is a. not paid legally. b. not binding legally. c. settled legally. d. partially settled.

settled legally

age of majority

the age at which a person, formerly a minor or an infant, is recognized by the law to be recognized by law to be an adult, capable of managing his or her own affairs and responsible for any obligations created by his or her actions

An express contract is one in which a. no specific oral or written agreement is made. b. the agreement is stated specifically. c. neither party can enforce the contract against the other in court. d. no legal obligation is intended.

the agreement is stated specifically.

When goods are sold at an ordinary auction, acceptance takes place when a. the auctioneer lets the gavel fall. b. the offeree pays for the goods. c. the auctioneer accepts a bid from the highest bidder. d. the auctioneer presents the goods for sale.

the auctioneer lets the gavel fall

Acceptance

(1) 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. (2) In negotiable instruments law, the drawee's signed agreement to pay a draft when presented.

The seven methods of terminating an offer are

(1) lapse, (2) rejection, (3) counteroffer, (4) revocation, (5) death or insanity, (6) illegality, and (7) impossibility.

A quasi contract

(a contract implied in law) is a court-created contract designed to prevent unjust enrichment—that is, one that prevents one person from receiving a benefit at the expense of another person.

Fowler, an antiques dealer, wrote a letter to Gorcey on May 9 offering to sell Gorcey the grandfather clock that Gorcey had seen at Fowler's antiques show. The letter stated that the acceptance had to be received by May 15. Gorcey mailed a letter of acceptance on May 15 that reached Fowler on May 16. A valid contract was made a. on May 15. b. on May 9. c. on May 16. d. at no time.

at no time

Quantum meruit (pronounced kwahn-tuhm mehr-oo-wuht)

Literally, ?as much as he deserves??an expression describing the extent of liability on a contract implied in law (quasi contract). An equitable doctrine based on the concept that one who benefits from another's labor and materials should not be unjustly enriched thereby but should be required to pay a reasonable amount for the benefits received, even absent a contract.

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.

Quasi contract

A fictional contract imposed on parties by a court in the interests of fairness and justice; usually, quasi contracts are imposed to avoid the unjust enrichment of one party at the expense of another.

covenant not to compete

a common provision in a contract for sale of a business in which seller agrees not to compete in the same business for a period of years or in the geographic read. This covenant is usually allocated (given) a value in the sales price

exculpatory clause

a contract provision that relives one party of liability if damages are caused during the execution of the contract. The party that issues the exculpatory clause is typically the one seeking to be relieved of the potential liability

Thomas said to Winton: "I'll sell you my computer for $2,000." Winton replied: "I'll take it if you will include a used printer." Winton's reply legally resulted in a. a binding contract. b. a counteroffer. c. revocation. d. substitution.

a counteroffer

Agreement

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

Forum-selection clause

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

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.

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.

Accord and Satisfaction

An agreement for payment (or other performance) between two parties, one of whom has a right of action against the other. After the payment has been accepted or other performance has been made, the "accord and satisfaction" is complete and the obligation is discharged. Accord- agreement Satisfaction- performance (takes place after agreement)

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.

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.

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.?

Oral contracts a. are not legal. b. cannot be enforced in court. c. lack agreement. d. are harder to prove than written contracts.

are harder to prove than written contracts

A contract implied in fact a. does not exist in the eyes of the law. b. can be expressed orally or in writing. c. arises from the actions of the parties rather than from a specific agreement. d. generally is not enforced by the courts because competent parties are lacking.

arises from the actions of the parties rather than from a specific agreement.

Rescission

unmaking of contract so as to return parties to positions occupied before contract made; two parties can mutually agree to rescind contract

Carelli bid $125 for an antique table at a flea market auction. Legally this bid is considered a(n) a. acceptance to an offer. b. bilateral contract. c. counteroffer. d. valid offer.

valid offer

Peters promised to pay Carter $50 if he repaired a lawnmower. Carter repaired the lawnmower but has not been paid yet. At this point, this contract is a. valid, unilateral, and executory. b. valid, bilateral, and executory. c. valid, bilateral, and executed. d. valid, unilateral, and executed.

valid, unilateral, executory

A valid contract must contain at least these four requirements

1) agreement, reached between at least two valid parties; (2) consideration—something of value exchanged by each party; (3) competent parties—individuals legally and mentally capable of understanding that they are making a contract; and (4) legality—not in violation of the law.

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.

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 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.

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.

Bargained-for Exchange

Consideration must provide basis for bargain struck between contracting parties

Which of the following agreements is unenforceable because of lack of valid consideration? a. Johnson agreed to donate $1,000 to the United Hospital Building Fund. On the basis of this and similar promises, construction was started. b. Davis promised to give his neighbor's son $50 if the boy would refrain from trespassing on his property. Because of Davis's promise, the boy complied. c. Boyd agreed to sell his used motorboat to Yates for $500. Yates offered the $500. d. Philips promised his nephew $200 if the boy would refrain from smoking until he reachedage twenty-one. Because of this promise, his nephew did not smoke.

Davis promised to give his neighbor's son $50 if the boy would refrain from trespassing on his property. Because of Davis's promise, the boy complied.

Extrinsic evidence

Evidence that relates to a contract but is not contained within the document itself, such as the testimony of parties and witnesses, or additional agreements or communications. A court may consider extrinsic evidence only when a contract term is ambiguous and the evidence does not contradict the express terms of the contract.

Illusory Promises/Aleatory

if term of contract express such uncertainty of performance that promisor has not definitely promised to do anything--> no bargained-for consideration, unenforceable

Chang owed Scott $800 but was unable to pay Scott on the due date. Scott agreed to let Chang pay him the following month. This agreement a. is not binding legally. b. is binding legally. c. is enforceable by Chang. d. contains adequate consideration by Scott.

is not binding legally

ratification

the confirmation or adoption of an act that has already been perfomed

usury

the crime of charging higher interest on a loan than the law permits

Revocation of an offer takes place when a. the offerer has been properly notified. b. the offeree has been properly notified. c. a proper counteroffer is made. d. the offeree properly refuses the offer.

the offeree has been properly notified

Consideration

the value, such as cash, given in return for a promise (bilateral) or in return for performance (unilateral) Two parts: 1. Something of legally sufficient value given in exchange for promise 2. Bargained-for exchange

Contracts that involve important or complicated matters should be a. implied in fact. b. written. c. breached. d. implied in law.

written

For a contract to be valid, four essential elements are required. All of the following are essential elements of a valid contract except a. offer and acceptance. b. competent parties. c. consideration. d. written form.

written form

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.

Executed contract

A contract that has been completely performed by both parties.

Executory contract

A contract that has not as yet been fully performed.

E-contract

A contract that is entered into in cyberspace 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 (canceled, or annulled) at the option of one of the parties.

A police officer is not entitled to a reward offered for the arrest of a criminal because a. the officer has a legal duty to arrest criminals. b. a reward is not legal consideration. c. the reward is not an offer. d. the reward is too high.

the officer has a legal duty to arrest criminals.

Charitable Subscriptions

promise to make donation (previously viewed as gift); applies doctrine of promissory estoppel to enforce donations b/c of detrimental reliance

Adequacy of Consideration

In many cases, exchange of promises and potential benefits deemed sufficient consideration Shockingly inadequate consideration can indicate that fraud, duress, or undue influence was involved

innocent misrepresentation

Innocent misrepresentation is one of the three recognized varieties of misrepresentations in contract law. Essentially, it is a misrepresentation made by someone who had reasonable grounds for believing that his false statement was true.

Your uncle gave you a TV. He could not claim lack of consideration and demand its return because a. the promise of a gift is unenforceable. b. the TV is future consideration. c. consideration is unimportant once an agreement is executed. d. the consideration was inadequate.

consideration is unimportant once an agreement is executed.

Caldwell offered to sell his used car to Jones for $2,000. Jones refused. The offer has been terminated by a. performance. b. mutual agreement. c. revocation. d. rejection.

rejection

An illegal contract generally would be considered a. valid. b. voidable. c. implied. d. void.

void

A contract that can be enforced unless a party legally entitled to avoid the contract does so is called a a. void contract. b. voidable contract. c. quasi contract. d. contract implied in law.

voidable contract

Bentley, a minor, bought a set of golf clubs for $250 from Mickey's Sporting Goods Shop. This is an example of a a. void contract. b. voidable contract. c. quasi contract. d. social agreement.

voidable contract