Vocab: Modules 18-36

offers

All written offers must be presented unless the client states otherwise in writing; Must be presented promptly; Rejections & counter-offers also must be presented promptly; Any changes initialed by all parties Happen before a contract is fully made "proposals"

auction without reserve

An auction in which the seller expressly gives up his or her right to withdraw the goods from sale and must accept the highest bid. a definite offer

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).

Latent Defect

Hidden defect -one that a simple or casual inspection by a prospective purchaser ordinarily would not reveal. Common examples are a cracked motor block in an automobile and a termite infestation in a house

usage of trade

"any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question." In essence, this means that in determining the meaning of the contract, the courts may consider, the usage of the trade in general as established by contracts and performance of other persons in the industry.

fraud

"deception" the intentional misleading of one person by another Perhaps the most common type occurs when one person simply lies to another about a significant fact and a contract results

exculpatory clause

"only cover negligence, and not intentional wrongful acts." A clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault. "Not liable for losses," a sign might read. However, will not be enforceable to relieve one of liability for negligence if the contract involves a matter that ''substantially affects the public interest''—in other words, in contracts involving goods or services that are basic to daily life. will not be enforceable to relieve one of liability for negligence if the contract involves a matter that ''substantially affects the public interest''—in other words, in contracts involving goods or services that are basic to daily life.

mortgage

"the parties to a civil suit were not permitted to testify in their own behalf; thus the testimony of other witnesses was even more important than it is today." a transfer of an interest in land by a borrower to a creditor as security for a debt, and is an interest that is contingent upon the debtor's default.

illegal contract

"void and enforceable" A contract that cannot be enforced because it is contrary to legislation or public policy. Courts feel that such a hands-off policy is, in most cases, the best way to discourage the making of. Only in exceptional situations will a court feel that the results obtained under such a policy are so questionable as to warrant some measure of judicial relief.

debtor

((Tom's) obligation) a person or institution that owes a sum of money.

Ancillary Covenant Not to Compete

(Noncompetition Clause or "Noncomplete") a formal agreement asking former employees not to perform similar work within a designated area for a specified amount of time after leaving their original employer obligating a partner who leaves the business to not enter into competition with the partnership in a described market for a stated period of time.

guarantor

(like Tom's millionaire uncle, in our scenario above) promises to pay

Void Contract

A contract having no legal force or binding effect. If someone takes advantage of an Alzheimer's patient and tricks him into agreeing to sell his Rolex for $10, a void contract has been formed.

Express Contract

A contract in which the terms of the agreement are fully and explicitly stated in words, oral or written. If Joe and Sam put their agreement in writing and sign it, that would be an example

Implied Contract

A contract formed in whole or in part from the conduct of the parties. If Joe walks into Sam's convenience store when Sam is busy, picks up a candy bar, shows it to Sam and places the purchase price on the counter and walks out the door after Sam nods back

Executed Contract

A contract that has been completely performed by both parties. If you bring me the $5,000, I give you the keys and title to my car, and you drive away in it

Executory Contract

A contract that has not yet been fully performed. If you and I have signed a contract that calls on me to sell you my car for $5,000

Unilateral Contract

A contract that results when an offer can be accepted only by the offeree's performance. If someone does turn up with an actual piece of the meteor, then the finder gets the cash

Valid Contract

A contract that results when elements necessary for contract formation (agreement, consideration, legal purpose, and contractual capacity) are present. As a result, it is enforceable against both parties

Option Contract

A contract under which the offeror cannot revoke the offer for a stipulated time period (because the offeree has given consideration, money or something else of value in exchange for the offer to remain open).

superior knowledge

A duty to speak exists if one party has superior knowledge about the subject matter of the contract as a result of his or her experience, training, or special relationship with the subject matter. a buyer of Oklahoma land who, by virtue of his employment with an oil company, learns of an oil "strike" on an adjacent ranch would be guilty of fraud if he did not disclose this information to the seller, a rancher.

statues of limitations

A federal or state statute setting the maximum time period during which a certain action can be brought or certain rights enforced. limiting the time a creditor has to sue a debtor after the debt becomes due. If the creditor waits too long before suing, the case will be dismissed as a "stale" action.

Common Law

A legal system based on custom and court rulings These rules are used to decide everything that matters in many contracts lawsuits.

Offeree

A person/party to whom an offer is made.

Offeror

A person/party who makes an offer.

Affirmative Action

A policy in educational admissions or job hiring that gives special attention or compensatory treatment to traditionally disadvantaged groups in an effort to overcome present effects of past discrimination.

fiduciary relationship

A relationship of trust and confidence, as between trustee and beneficiary, attorney and client, or principal and agent.

reasonableness

A restrictive covenant on the part of the seller, in a particular case, is enforceable if its limitations are no broader in terms of time and geographic scope than reasonably necessary to afford such protection. a promise by the seller of a retail grocery in Kalispell, Montana, that he will not engage in the retail grocery business ''within the City of Kalispell for the period of one year after the sale'' is probably reasonable and thus lawful.

Checks and Balances

A system that allows each branch of government to limit the powers of the other branches in order to prevent abuse of power

Bilateral Contract

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

Unenforceable Contract

A valid contract rendered unenforceable by some statute or law. For example, imagine that Ron and Doug made a contract in 1995 for something minor, and then forgot about the whole thing. Now, decades later, Ron wants to enforce the deal. The agreement would not be unenforceable. It was valid when made, but too much time has elapsed for it to be valid any longer. (or bankruptcy)

Mailbox Rule - Acceptance

Acceptance effective upon mailing. Exception: - Offer is irrevocable (by arrival). - Offer specifies differently. - Rejection sent first (by arrival). - If rejection sent second but arrives first, and offeror relies, then rejected. "delayed, non-real time communications about acceptances"

Bait and Switch Advertising

Advertising one product (the "bait") at a very attractive price, then informing the customer that the advertised product is either unavailable (insufficient quantity) or of poor quality, convincing the customer to purchase a different, more expensive product. NOTE: Vague generalities and/or obvious exaggerations collectively called puffery -- are not deceptive.

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.

Uniform Commercial Code (UCC)

Body of laws governing commercial transactions in the United States. governs contracts that involve a "sale of goods"

Equal Protection Clause

Clause in the Fourteenth Amendment that forbids any state to deny to any person within its jurisdiction the equal protection of the laws. By interpretation, the Fifth Amendment imposes the same limitation on the national government. This clause is the major constitutional restraint on the power of governments from making arbitrary and unreasonable distinctions among persons because of race, national origin, or sex.

discharged debts

Debts (or portions thereof) that are discharged as a result of a bankruptcy.

Battle of the Forms

Determining which version of a contract has precedence. a contract is formed if the offeree's primary intent is to accept an offer even if the offeree's form does not match the offeror's form in all particulars. The essence of the rule is that no party is allowed to unfairly surprise the other with contract provisions hidden in fine print

de facto discrimination

Discrimination on the basis of race, sex, religion, ethnicity, and the like that results from social, economic, and cultural biases and conditions. If a distinction or classification is neutral on its face but happens to have a disproportionate impact on a particular group, strict scrutiny usually does not apply.

Objective Intent

For an offer to have legal effect, the requirement that, generally, the offeror must have a serious intention to become bound by the offer and that the terms of the offer must be reasonably certain. "A person's apparent intent" - Relevant (the key to whether an offer exists,)

insane in fact.

If at the time the contract was made, the person was so impaired that she was incapable of understanding the nature and effect of the particular agreement, then the contract is voidable. A contract made by someone who is insane in fact is treated in the same way as a contract made by a minor.

Knowledge of Falsity

If the defendant lied and the plaintiff can prove it, actual malice has been shown. if a person makes a statement ''with a reckless disregard for the truth,''

duress

If the degree of compulsion is so great as to totally rob the person of free will —a genuine and reasonable fear on the part of the victim that he or she will be subjected to an injurious, unlawful act by not agreeing to the other party's demands. (The threat of a criminal suit is generally held to constitute duress.)

regulate commerce with foreign nations and among states

Key point in Article 1, Section 8 (emphasis added)

Mistake

Often, the mistake involves a mistaken opinion or judgment rather than a mistaken fact, and in those circumstances no relief will be granted in certain limited situations a plea of mistake will give grounds for rescission of a contract, if the mistake was one of fact.

Recission

Once fraud is established, the defrauded party always has the right to rescind the contract. is designed to restore the parties to their original positions. In some instances the defrauded party may wish to keep the consideration (for example, a parcel of land), even though it had been misrepresented by the seller. As noted earlier, fraud may also amount to an intentional tort and generate additional damages, including punitive damages, as well

Obligor

One who owes an obligation to another (the assignee)

Duty of Good Faith

Required by every UCC contract, this is defined as "honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade." the UCC is an attempt to establish a framework promoting efficient, but also fair, commercial transactions in goods.

assignee

Party to whom right is transferred.

assignor

Party who transfers the right.

Enumerated Powers

Powers specifically given to Congress in the Constitution (Article 1, Section 8); including the power to collect taxes, coin money, regulate foreign and interstate commerce, and declare war.

Obscenity

Quality or state of a work that taken as a whole appeals to a prurient interest in sex by depicting sexual conduct in a patently offensive way and that lacks serious literary, artistic, political, or scientific value. Companies that sell extreme forms of pornography cannot expect First Amendment free speech protection.

Goods

Tangible, Physical objects such as cars, clothes, laptops, or shoes (things)

Novation

Substituting a new obligation for an old one or substituting new parties to an existing obligation. if the party to whom a contractual duty is owed specifically releases the original party with whom it had contracted (the delegator), and agrees that the delegatee will be substituted for the delegator as the only one who owes the obligation, the delegator is no longer obligated on the contract.

Contract Enforcement

Sale of goods contracts over $500 must be in writing to be enforceable If we handshake you will pay $100 for my used TV, verbal agreement can amount to an enforceable contract If we handshake you will pay $10,000 for my used car, you do not have to buy the car (Special circumstances where this can be enforceable) The watch is a "good", and as such, the fact that it costs at least $500 would often be relevant. But, the UCC calls for the enforcement of verbal contracts, even when goods do cost at least $500, in some circumstances, one of which is when the goods have been paid for and the payment accepted.

Unilateral Offer

Seeks a performance. "If you FIND me a buyer for my car, I'll PAY you 5%." CL: if offeree begins performance, this = an acceptance and an implied promise to complete performance. UCC: if beginning performance is acceptance then the offeree must NOTIFY the offeror of its acceptance within a reasonable time or the offeror may treat the offer as having lapsed prior to acceptance. An example would be a promise by a TV station to pay $5000 to the first person who brings to its studios any piece of a meteor which has recently fallen to earth.

Bilateral Offer

Seeks a return promise. "I promise to SELL you my car if you PROMISE to pay $10,000 for it."

statement in fact

Statements about the age of a horse, the number of acres in a tract of land, and the net profit made by a business during a given year the misstatement must be material (important) A statement that it contained 770 acres probably would be materially false. If the innocent person can prove that a particular statement made to him or her was false in a material way, the first element of fraud has been established.

Judicial Branch

The Branch of government that decides if laws are carried out fairly. The Supreme Court sits atop this branch which interprets laws.

Commerce Clause

The clause in the Constitution (Article I, Section 8, Clause 1) that gives Congress the power to regulate all business activities that cross state lines or affect more than one state or other nations

seperation of powers

The division of a central government into two or more branches, each having its own responsibilites and authorities.

strict scrutiny test

The highest level of a test applied by the court when a classification is based on race; the government must show that there is a compelling reason for the law and no other less restrictive way to meet the interest. The courts apply the strict scrutiny test primarily to intentional racial or national origin distinctions by the government.

rational basis test

The lowest-level standard used by the Supreme Court to determine whether a law is compatible with the Constitution. A law subject to this standard is assumed to be constitutional as long as its goals are clearly linked to its means. In other words, there merely has to be some legitimate government interest - not even a particularly good one - and the distinction must have some rational relationship with that interest

Intermediate Scrutiny Test

The middle level of scrutiny the courts use when determining whether unequal treatment is justified by the effect of a law; this is the standard used for gender-based discrimination cases and for many cases based on sexual orientation. In such a case, the government must prove that the classification substantially advances an important government interest. This test is stricter than the rational basis test

obligee

The remaining party—the party to the original contract to whom the performance is owed

Reliance

The victim of a misrepresentation must show that he or she reasonably relied on the misstatement at the time of contracting. does not exist if the one accused of fraud can prove that the other party actually knew the true facts before making the contract.

perjured testimony

The voluntary violation of an oath or vow, either by swearing to what is untrue or by omission to do what has been promised under oath; false testimony. the parties to a civil suit were not permitted to testify in their own behalf; thus the testimony of other witnesses was even more important than it is today.

Creditor Beneficiary

When a contract is made between two parties for the express benefit of a third person A owes X $500. A later sells a piano to B, on the understanding that B, in return, is to pay off A's indebtedness to X.

mutual mistake

When both parties are mistaken If a buyer purchases a seller's summer home on April 10 and subsequently learns that, unknown to either party, the home was destroyed by fire on April 1,

Subjective Intent

Words or actions an individual may have intended but did not communicate. Actual intent "in your own mind" - Not relevant

contract

a binding agreement between two or more persons that is enforceable by law If a person breaks a "regular promise," courts will not be interested in requiring performance. But if a person breaks an agreement that amounts to a contract, a court will enforce the deal and order a remedy if asked to do so.

adjudicated insane

a guardian is appointed. any contract made by the insane person rather than by the guardian is absolutely void—that is, creates no liability whatever, even if it is never disaffirmed by the incompetent person or the guardian

course of dealing

a sequence of previous conduct between the parties to a particular transaction which is fairly regarded as establishing a common basis of understanding for interpreting their expressions and other conduct." this means that in determining the meaning of the contract, the courts may consider the past course of dealing between the parties in other contracts they have had

Merchants

access to a degree of commercial expertise not found in a member of the general public (manufacturers, wholesalers, and others) a person or company involved in wholesale trade, especially one dealing with foreign countries or supplying merchandise to a particular trade. 1."deals in goods of the kind" 2. "by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction." 3.employing a merchant

common carriers

airlines, trains, buses, ferries

symbolic expression

an act, rather than actual speech, used to demonstrate a point of view In other words, expression by nonverbal means such as wearing black arm bands or picketing is protected from government suppression. The giving of money to political candidates, charitable organizations, or various other entities is even treated as a form of protected expression.

Covenants not to compete

an agreement in which one party agrees not to compete directly with the business of the other party; may be limited by geography or length of time

course of performance

arises out of "repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other." this means that in determining the meaning of the contract, the courts may consider, in order of importance, the previous course of performance of this particular contract,

Misrepresentation of a material fact

broadly interpreted to include any word or conduct that causes the innocent person to reach an erroneous conclusion of fact. Thus a seller of apples who selects the best ones in a basket and puts them on top of others of inferior quality has

peppercorn rule

consideration either exists or it doesn't—courts do not inquire into whether there has been enough consideration to support a contract. If I agree to pay you $100 for a baseball card that is worth only $1, you get much more than I do. Your benefit is much larger than mine. But, our deal is still a "two-way street", because we both receive something of measureable value.

Contracts of Adhesion

contract offered by a dominant party to a party with inferior bargaining power on a take-it-or-leave-it basis Common examples are apartment leases, hospital admission forms, and sales contracts from new car dealers

Scope of Article 2 of the UCC

deals with the sale of goods: tangible - physical existence moveable -Of course, almost anything, even real estate, is capable of being moved, shovel by shovel, if enough effort is expended. But the word is intended to be applied reasonably rather than literally

intent to deceive

defendant knew or should have known that the statement was false

deligator

delegates his or her contractual duties to the assignee,

Contract Interpretation

determining what unclear parts of contracts mean, but it allows more liberal use of extrinsic evidence to determine the parties' intent in sale of goods contracts

intoxicated

drunk or high when the contract is made. —the same test used in the case of those who claim that they were insane in fact

Firm Offer Rule

holding merchants to their signed promises to keep offers open for a specified time of less than three months' duration even in the absence of consideration.

unilateral mistake

if only one of the parties was mistaken, rescission will not be granted unless that person can show that the other party knew, or should have known, of the mistake at the time the contract was made. B purchases a painting from S for $300; B believes it was painted by a well-known artist. B does not, however, disclose this belief to S. In fact, the painting is the work of an amateur and consequently worth no more than $50. On the other hand, B would have been permitted to rescind if S had been aware of B's mistake and had not corrected it.

Necessaries

include food, lodging, clothing, and medicine

mental impairments

include those who are mentally handicapped, severely senile, or mentally ill.

genuine assent

it might appear that a party assented to the agreement, but the agreement was not real in the eyes of the law. Sometimes, the voidable contract option to set aside the agreement is available to a victim of fraud or threats of violence. It may also extend to parties who make a few very specific kinds of mistakes, or those who are "unduly influenced".

creditor

lendor - is to look primarily to the debtor for repayment, and only if the debtor does not pay is the creditor to look to the guarantor.

caveat emptor

let the buyer beware (The traditional common-law rule) Today Court rulings and state consumer protection statutes have created a number of situations in which sellers must volunteer adverse information or be charged with fraud. Silence - Parties are said to deal at "arm's length" when their relationship is such that neither party owes a duty to divulge information to the other party, as distinguished from such fiduciary relationships such as attorney-client, guardian-ward, employer-employee, principal-agent, and business partner relationships

Statements of opinion

like predictions, are also not statements of fact. statements that "this is an excellent neighborhood in which to raise children" or that "this painting will harmonize beautifully with the colors of your living room" involve conclusions with which others might disagree; thus they cannot be the basis of an action of fraud brought by one who relied upon them, even if the defendant did not truly hold the opinion.

disaffirmed

may be accomplished by a clear indication of an intent to not be bound by the contract, or, if the minor simply does not perform her obligations under the contract and is sued for breach by the adult, the minor may assert her lack of legal capacity as a defense to any liability for breaching the contract.

Legitimate Business Interest

nonancillary covenants not to compete generally do not protect any legitimate business interest. On the other hand, such a covenant connected to the sale of a business often does

Advertisements

not considered a contractual offer, but considered as invitations to the public to negotiate. Advertisements are considered offers to receive offers usually considered to be preliminary negotiations, rather than offers to sell

innocent representation

occurs when a person makes a statement he believes to be true but actually misrepresents facts. An innocent party can rescind a contract, but usually CANNOT seek damages.

sufficient written memorandum

or "Note" - shall be in writing and signed by the party sought to be charged therewith or some other person thereunto by him lawfully authorized." the writings clearly refer to one another, if they are physically attached to one another, or if they all clearly relate to the same transaction.

Delgation

or the transfer of one party's contractual duties to another

third parties

or those outside of a contract. Outsiders usually cannot go to court to enforce deals that they did not make, even if they stand to gain something if the contract is completed.

incidental beneficiary

ordinary third party (can't do anything)

Auctions

public sales in which property is sold to the person who offers the most money for it an efficient way of determining a reasonable price in transactions between willing sellers and buyers

rejection

refusal to accept by the offeree

Statute of Frauds

requires that a promise to answer for the debt of another must be in writing to be enforceable.

Injury

showing by the innocent party that he or she suffered an injury, usually an economic loss, as a result of the misrepresentation. in a typical case involving the sale of property, the buyer is able to show that the value of the property he or she received is substantially less than it would have been if the seller's representations had been true.

nonancillary covenants

stand alone; they do not protect any existing, legally recognized interest. (do not protect any legitimate business interest.) These covenants—such as a promise by a father to pay $10,000 for the son's promise not to engage in medical practice—are generally considered to be an unreasonable restraint of trade and are thus generally illegal and unenforceable.

personal services

such as those of a teacher, physician, or lawyer—are non-delegable without the obligee's consent (even if the delegatee is as professionally competent as the delegator)

auctions with reserve

the act of putting a particular item up for auction indicates only a willingness to consider offers to purchase can withdraw goods

Defamation

the action of damaging the good reputation of someone; slander or libel. Companies or individuals who communicate lies are potentially liable in damages to the person whose reputation is injured.

Executive Branch

the branch of government that carries out the laws made by the legislative branch (President)

Legislative Branch

the branch of government that makes the laws (Congress)

reasonably possible

the contract in question to have been performed within one year from the time it was made.

revived

the creditor now has a new statute of limitations period in which to bring suit a five-year statute of limitations had run on a $1,000 debt, and the debtor thereafter mailed a check for $50 to the creditor, the creditor now has an additional five years in which to commence legal action for the rest of the money. A mere acknowledgment by the debtor that the debt exists will also revive the obligation to pay.

Consideration

the idea that a contract must be a bargained-for exchange (no tangible, measureable, benefit, so there is no exchange of value). First, promisees must suffer a legal detriment by doing (or promising to do) something they are not already obligated to do or refraining from doing (or promising to refrain from doing) something they are legally entitled to do. Second, the detriment must induce the promise. And third, the promise must induce the detriment.

Promissory Estoppel

the legal enforcement of an otherwise unenforceable contract due to a party's detrimental reliance on the contract This is an equitable doctrine that is invoked when necessary to promote fairness.

Negotiated Contract

the owner selects a contractor to do the work. The contractor and owner then negotiate a price and other terms of their agreement. The terms of many contracts are agreed upon only after a certain amount of bargaining takes place between the parties

delegatee

the party to whom the duties are transferred

judical review

the power of the Supreme Court to declare laws and actions of local, state, or national governments unconstitutional

guaranty contract

the specific kind of agreement that involves the debts of others and must be written occur in situations of "secondary liability

Revocation

the taking back of an offer by the offeror You can take an offer back whenever you like, so long as you communicate to the offeree before an acceptance has occurred

fighting words

threats, epithets, false alarms, and the like, words that by their very nature inflict injury on those to whom they are addressed or incite them to acts of violence

consideration (Code's nontechnical approach)

unlike at the common law, an agreement modifying a sales contract needs no consideration to be binding. Parties are bound to their promises to modify an existing contract, and another technical defense is eliminated.

delegated

when duties are transferred he could also delegate his duty to mow Ned's lawn to Mae's Lawn Service if Lenny gets so busy that he can't himself mow all the lawns he has contracted to mow

assigned

when rights are transferred to third parties Lenny could assign his right to collect the $60 from Ned to Sam (to whom Lenny owes money)

economic duress

when there is a threat to do economic harm unless the party with weaker economic power agrees to a contract, and the threatened party has little or no realistic choice but to agree.

undue influence

when there is a threat to do economic harm unless the party with weaker economic power agrees to a contract, and the threatened party has little or no realistic choice but to agree. that he or she was induced to enter into a particular contract by virtue of the dominant party's power and influence, rather than as the result of exercising his or her own volition

Donee Beneficiary

where a contract is made for the benefit of a third person who has not given consideration to either contracting party. The fact that Carol has not furnished consideration to the insurance company is immaterial; it is sufficient that Al, the insured, has done so by making his premium payments.