BLAW Contract Law

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: -An illusory promise is no promise at all. Zara never promised or agreed to the deal. An illusory promise is not valid consideration

Agreements regarding marriage in which one party is gaining something other than a return on his or her promise to marry ___________________

are within the statute of frauds and therefore must be in writing: -When one party promises something to the other as part of an offer of marriage, the contract must be in writing to be enforceable

In which of the following situations would the contract in question be void?

An individual who has been adjudicated insane enters into a contract: -When a person has been adjudicated insane and has a guardian appointed, that person has no capacity to enter into contracts

Which one of the following is most limited in taking legal action as a third-party beneficiary?

Incidental beneficiary: -ncidental beneficiaries do not have the right to enforce the contracts from which they benefit

Under the common law, which of the following qualifies an acceptance as a valid acceptance?

A) Agreement to the definite and certain terms of the offer B) Manifestation of intent to be bound by the acceptance C) Communication to the offeror D) A valid acceptance requires none of these elements ALL OF THE ABOVE

Another name for ______________ is intentional misrepresentation

fraudulent misrepresentation: -A fraudulent misrepresentation is a consciously false representation of a material fact intended to mislead the other party. It is also referred to as intentional misrepresentation because the party making the misrepresentation either knows or believes that the factual claim is false or knows there is no basis for it

Which of the following is not a way to discharge a contract by mutual agreement?

Anticipatory repudiation

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

Money is exchanged: -A legally binding contract generally requires consideration as one of its elements - however, the consideration need not necessarily be money

A person has _________ to enter into a contract if she suffers from a mental illness or deficiency that prevents her from understanding the nature and obligations of the transaction

limited capacity: -In this situation, a person may disaffirm the contract at any time until a reasonable time after she no longer suffers from the mental deficiency. Once the deficiency has been removed, a person may also choose to ratify the contract

A(n) ____________ occurs when a party unjustifiably fails to substantially perform his obligations under the contract

material breach

Which of the following is considered a material term?

-Quantity -Price -Subject matter -Parties -ALL OF THE ABOVE

f no means of communicating the acceptance is specified, what type of means of accepting is generally not valid?

-Telephone -Mail -Email -Fax ALL OF THE ABOVE: -If no means of communicating the acceptance is specified, any reasonable means is generally valid. Telephone, mail, fax, and e-mail are all valid means of accepting an offer, as is accepting it in person

Which of the following types of agreements is not a type of agreement that is generally illegal in many states?

Agreements for the sale of used products: -Agreements to commit crimes or torts and agreements involving usury or gambling are generally illegal in many states

Two people enter into a contract under which one of them promises to pay the other $100,000 for killing his business partner. Under which element of a contract is this contract not enforceable?

Legal object: -Legal object means that to be enforceable, the contract cannot be either illegal or against public policy

Which of the following contractual rights can be assigned?

Real property rights

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

providing the requested performance: -If the offer is for a unilateral contract, the offeree can accept only by providing the requested performance

Suppose a 17-year-old, Kendall, enters into an agreement to purchase a Harley Davidson from an ad she saw in the paper. She will pay $1,000/month until the bike is paid off. After making the third payment, Kendall turns 18 and decides to move out of state. She e-mails the seller of the motorcycle and tells him not to worry because even though she is moving, she still intends to make her monthly payments to purchase the bike. The above scenario is an example of what legal concept?

Express ratification: -An express ratification occurs when, after reaching the age of majority, the person states orally or in writing that he or she intends to be bound by the contract entered into as a minor

Contractual obligations are sometimes imposed by the courts to prevent one party from being unjustly enriched at the expense of another. What are these called?

Quasi-contracts: -Quasi-contracts are sometimes called implied-in-law contracts, but they are not actually contracts. Rather, in order to prevent one party from being unjustly enriched at the expense of another, the courts impose contractual obligations on one of the parties as if that party had entered into a contract

In what circumstances could lack of genuine assent apply to a contract?

The offeror engages in fraud and misrepresentation with regard to the contract

The test for compliance with the one-year rule considers which of the following?

The possibility of completing the contract within one year: -The one-year rule considers the possibility of completing the contract in one year

Which of the following exceptions to the parol evidence rule falls under the Uniform Commercial Code?

When it addresses prior dealings between the parties or usages of trade in the business they are in: -According to the UCC, parol evidence is admissible for the sake of clarification if it addresses prior dealings between the parties or usages of trade in the business they are in

Which of the following statements is false?

With intended beneficiaries, contracting parties did not intend to benefit the third party with their contract: -An intended beneficiary is a third party to a contract whom the contracting parties intended to benefit directly from their contract. In determining whether a third party is an intended beneficiary, courts ask whether the contracting parties intended that the third party be the "direct," "primary," or "express" beneficiary of the contract

Usury occurs when ________________

a party gives a loan at an interest rate above the legal maximum: -Usury occurs when a party provides a loan exceeding the legal maximum rate

The ________________ gives the contractual right to the first party granted the assignment

first-assignment-in-time rule: -Suppose Shelia assigns her contractual rights to Tony. A week later, she assigns the same rights to Cho. Under the first-assignment-in-time rule, Tony legally has Shelia's rights to the contract

Suppose that Jeremy agrees to pay Shelly $50 a month for 4 months to tutor him for his business law class. However, Jeremy breaches the contract and terminates Shelly for no reason other than the fact he wanted a more attractive tutor. Shelley had two months left on the contract and could not find another tutoring job for those two months. How much in compensatory damages would Shelley be entitled to?

$100: -The most frequently awarded damages are compensatory damages, damages designed to put the plaintiff in the position he would have been in had the contract been fully performed. These damages are said to compensate the plaintiff for his loss of the benefit of the bargain

Suppose a construction company enters into a contract to build a warehouse for for a landowner for a contract price of $700,000, where the cost of raw materials and labor is $400,000. How much could the construction company recover in lost profits if the landowner were to breach the contract before performance had begun?

$300,000: -In construction contracts, where an owner enters into an agreement to have a building constructed, damages are calculated differently depending on who the breaching party is and what stage the construction is in when the breach occurs. If the contract is breached by the owner before the construction is begun, damages are simply lost profits, which are calculated by subtracting the projected costs of construction from the contract price

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?

-Medical services -Shelter -Clothing -Food ALL OF THE ABOVE: -The purpose of this limitation on the minor's right to disaffirm is to ensure that sellers will not be reluctant to provide minors the basic necessities of life when their parents will not provide them

John agrees to lease a commercial property until the time when (and if) he is offered a job by Apple Computers. What kind of condition is this?

A condition subsequent: -A condition subsequent stipulates that a party has a duty to perform until a future event occurs that discharges the party from the obligation

Suppose Victor promises to stop smoking cigarettes during the winter. What type of promise has Victor made?

A promise to refrain from doing something: -In this case, Victor is refraining from smoking cigarettes, so he is making a promise to refrain from doing something

In which scenario is parol evidence permitted in court?

A) When contracts have been substantially modified B) When contracts are conditioned on orally agreed-on terms C) When contracts are incomplete D) When there are void or voidable contracts ALL OF THE ABOVE

Which of the following terms is not a condition required in promissory estoppel? I. One party makes a promise knowing the other party will rely on it. II. The other party does rely on the promise. III. The only way to avoid injustice is to enforce the promise

ALL OF THESE ARE REQUIRED: -Promissory estoppel occurs 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, even though it is not supported by consideration

Which one of the following is considered to be a legally binding offer?

Auction without reserve: -In an auction without reserve, the seller is committing himself to sell a product to the highest bidder

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

Both parties: -For a court to enforce a promise, both sides must offer consideration

Suppose that the Miami Heat basketball franchise enters into a contract with a sports apparel producer and screen printer. The team agrees to purchase 100,000 T-shirts for $5 each and 25,000 hats for $6 each indicating that the Miami Heat are the NBA champions. However, the terms of the contract indicate that the contract will only occur if first the Miami Heat win the championship that year. This scenario is an example of what?

Condition precedent: -When an entire contract is conditioned on something else occurring first, that first event is known as a condition precedent

______________ are foreseeable damages that result from special facts and circumstances arising outside the contract itself

Consequential damages: -Consequential damages result from foreseeable circumstances arising outside the contract

Which of the following contractual duties would generally not be delegable?

Contract for a famous artist to paint a portrait: -Any nonpersonal duties in a contract can be delegated. For example, delivering goods, mowing a lawn, paying money, and painting a house are all considered non-personal duties because they do not require particular skill or expertise, and most people could complete them. Thus, they can all be delegated

Which of the following types of contracts does not fall within the statute of frauds?

Contracts for the sale of goods totaling less than $400: -Contracts for the sale of goods totaling more than $500 are required to be in writing under the Uniform Commercial Code

What is it that can restrict what an employee may do after leaving a company and often dictates where, when, and for whom the employee may work?

Covenants not to compete: -Employers justify the use of covenants not to compete by saying they are necessary to protect their trade secrets, talent, and proprietary information

A court may prevent the offeror from revoking his offer when which of the following occurs?

Detrimental reliance: -Detrimental reliance occurs when the offeree had reasonably relied on the offeror's promise to hold the offer open and had taken action in reliance on the offer

One complication with contracts occurs when an assignor assigns two or more parties the same right, and confusion arises as to which party has the right to the contract. To solve this problem, the minority of states has adopted the __________, which states that the first assignee to give notice of assignment to the obligor is the party with rights to the contract

English rule: -Especially in a state using the English rule, parties are well advised to give notice of assignments to ensure that they maintain their assigned rights

On the streets of downtown Lubbock, 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. This scenario is an example of what?

Fraudulent misrepresentation: -A fraudulent misrepresentation is a consciously false representation of a material fact intended to mislead the other party

Which of the following is an element of an offer under common law?

Intent to be bound by an acceptance: -The elements of an offer are: serious intent by the offeror to be bound to an agreement; definite and certain terms; and communication to the offeree

Holding all other variables constant, the following agreements are required by the statute of frauds to be evidenced in writing EXCEPT?

Mutual promises to marry: -Mutual promises to marry do not fall within the statute of frauds because neither party is gaining anything other than a return on his or her promise to marry

Valerie is an incidental beneficiary to a contract. One of the parties to the contract breaches the contract. Valerie wishes to sue. Whom can she sue to enforce the contract?

Neither of the two parties to the contract: -One significant difference between intended and incidental beneficiaries is that incidental beneficiaries maintain no rights to enforce other people's contracts. Incidental beneficiaries do not have the right to enforce the contract

Bekah agrees to do bodywork on Fatima's car. In exchange, Fatima agrees to be a poker dealer at Bekah's underground casino. In the state where Bekah and Fatima live, there is a gaming statute that says all games of chance other than slot machines and the state lottery are illegal. Would the agreement be enforceable?

No, because part of the agreement violates a law and the agreement therefore calls for crime: -Contracts cannot be for illegal purposes or require illegal acts for performance. Any agreement to commit a crime or tort is illegal and unenforceable

A store places an advertisement in the newspaper for "Sale on Dell laptops - All Dell laptops for sale for $500 the last week in July!" Is the store making an offer?

No, the store is merely inviting potential customers to come to the store and offer $500 for a laptop: -Because no reasonable person would expect the store to be able to sell a computer to everyone who sees the ad, the court will interpret the intent of the store as being to invite readers to make an offer

You hire a band to perform at an event you are organizing. Can the band arbitrarily transfer their performing duty to another group?

No, this duty is personal in nature and the performances would differ significantly

Eugene agrees to finish painting Hazel's house within two weeks. A week in, Eugene realizes he cannot finish without additional help. He tells Hazel he will need an extra $700 to do this. Hazel agrees. With the additional help, Eugene finishes painting the house within the agreed two weeks. Does Hazel have to pay the extra $700?

No, under the preexisting duty rule, Hazel does not have to pay: -Under the preexisting duty rule, performance of a duty you are already obligated to perform under contract is not good consideration. Eugene was already obligated under the original terms of the contract to finish the painting within two weeks, therefore Hazel is under no legal obligation to pay him additional money to complete the job on time

Each of the following is true of a mutual mistake of fact EXCEPT?

One form of mutual mistake occurs when one party makes a mistake about a material fact and the other party knows about the mistake: -When one party makes a mistake about a material fact, and the other party knows about the mistake, then a unilateral mistake of fact is present

On rare occasions, rescission is permitted for unilateral mistakes. Which of the following scenarios is an example of when rescission might be available for a unilateral mistake?

One party made a mistake about a material fact and the other party had reason to know about the mistake: -Any of the following conditions would permit a court to invalidate a contract on grounds of unilateral mistake: (1) One party made a mistake about a material fact, and the other party knew or had reason to know about the mistake. (2) The mistake was caused by a clerical error that was accidental and did not result from gross negligence. (3) The mistake was so serious that the contract is unconscionable, that is, so unreasonable that it is outrageous

Suppose you are a donee beneficiary, if you have problems with the contract, whom can you sue?

Only the person who was supposed to perform for you: -The donee beneficiary is in the second strongest position because he can sue the person who is supposed to perform the contract for him. The third-party beneficiary who is in the strongest legal position is the creditor beneficiary because he can sue both the person who made the contract on his behalf and the person who was supposed to perform for him

Suppose Don enters into an agreement for a one-year gym membership, conditioned on his not moving out of the state for a new job. If he finds a new job out of the state, his obligation to be bound by the gym contract is discharged. Why?

The contract contains a condition subsequent: -A condition subsequent is a future event that terminates the obligations of the parties when it occurs

Which of the following is not true about the law of contract?

The law of contract serves as statutory law: -The law of contracts is primarily common law, not statutory law

Which of the following is not a possible defense to a lawsuit in contract?

The offeree lost his job and can no longer afford to proceed with the contract: -A contract is supposed to be entered into freely by both parties, but sometimes the offeror (the party proposing the contract) secures acceptance of the agreement through improper means such as fraud, duress, undue influence, or misrepresentation. The second defense to contracts is that the contract lacks the proper form, which typically means it isn't written down

Suppose Jared purchases a life insurance policy. Life insurance policies do not vest until the promisee's death. Jared originally made his wife Carla the intended beneficiary, but now that they are divorced, he wishes to make his daughter Haley the beneficiary instead. Can Jared change the beneficiary?

Yes, because Carla's rights were not vested yet

Natalie promises Brett that she will pay him $1,000 for painting her house. Brett agrees and purchases the painting materials, costing him $300. The following day Brett arrives at Natalie's house to paint but she had hired Kobe instead. Is Brett entitled to damages?

Yes, Brett relied on Natalie's promise and bought the materials with his own money: -Promissory estoppel occurs when one party makes a promise knowing the other party will rely, the other party actually does rely, and the only way to avoid injustice is to enforce the promise. Here, Natalie promised Brett $1,000 to paint her house and Brett relied (by purchasing $300 in paint and showing up), therefore the court will likely enforce the promise under the theory of promissory estoppel

Suppose you entered into a contract to clean someone's pool. Then, both you and the pool owner discovered that the pool water has produced toxic levels of chlorine over time. As a result, you cannot clean the pool without first decontaminating it. This change in knowledge about the toxicity levels of the pool is considered a material fact in the agreement. Can you rescind the contract?

Yes, this seems like a mutual mistake: -When both parties are mistaken about a current or past material fact, either can choose to rescind the contract. Rescission is fair because any agreement was an illusion

Suppose Xavier receives an offer to play on a minor-league hockey team a few states away from where he currently lives. He moves out of his apartment, turns down offers from other teams, and moves all his possessions to a new apartment close to the hockey arena. After moving there, Xavier is then told there is no position for him anymore! May he sue the hockey team?

Yes, this situation looks like promissory estoppel: -Promissory estoppel occurs 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, even though it is not supported by consideration

Susie enters into a contract that she would give Mikhail her trailer on four acres of wooded backcountry if he agrees to supply her with $25,000 of illegal cocaine and heroin. If Mikhail wanted to prove with oral evidence that the contract was void or voidable, could he?

Yes, void or voidable contracts are an exception to the parol evidence rule: -Certain conditions can make an otherwise valid contract void or voidable, such as its object is illegal, or it has some defect so serious that it is not a contract. While the contract does not list these conditions, the courts allow parol evidence to demonstrate them

A(n) ______________ arises when the party's duty to perform arises after a particular event occurs; if the event never occurs, the party's duty to perform never arises and the parties are thus discharged from the contract

condition precedent: -A condition precedent is a particular event that must occur in order for a party's duty to arise. If the event does not occur, the party's duty to perform does not arise. Frequently, real estate contracts are conditioned on an event such as the buyer's being able to sell his current home by a certain date

Equitable remedies are _________

court-ordered actions: -The remedies the potential plaintiff will be thinking about can generally be classified as either legal remedies (also known as monetary damages) or equitable remedies, some form of court-ordered action

When both parties are mistaken about a current or past material fact, ________________

either party can choose to rescind the contract: -With mutual mistake, rescission is fair because any agreement was an illusion. Ambiguity prevented a true meeting of the minds

Covenants not to compete in conjunction with the sale of a business are generally __________ if they are for a reasonable length of time and involve a reasonable location

enforceable: -Public policy requires fairness in business transactions, which does not occur when people profit from the sale of a business and then start a new business that destroys the one they just sold. Therefore, these types of covenants not to compete are generally enforceable so that the public interest can be protected

A(n) __________ releases one of the contracting parties from all liability, regardless of who is at fault or what injury is suffered

exculpatory clause: -An exculpatory clause releases one of the contracting parties from all liability, regardless of who is at fault or what injury is suffered. Because tort law attempts to return the wronged party to a state he or she was in before the wrong occurred, anything preventing this corrective mechanism is against public policy.

The terms of __________ contracts are all clearly set forth in either written or spoken words

express: -The terms of express contracts are all clearly set forth in either written or spoken words, whereas implied contracts arise not from words but from the conduct of the parties

When the courts deem a contract integrated, parol evidence is generally __________

inadmissible: -Integrated contracts are written contracts intended to be the complete and final representation of the parties' agreement. When the courts deem a contract integrated, save for the exceptions to the parol evidence rule, parol evidence is generally inadmissible. In partially integrated contracts, parol evidence is admissible to the extent that it clarifies part of the contract or addresses its enforceability

The mail-box rule is not applicable when there is ________________

instantaneous communication: -The mail-box rule provides that an acceptance is valid when the offeree places it in the mailbox, whereas a revocation is effective only when the offeree receives it. The mail-box rule is not applicable when there is instantaneous communication, such as over the phone, in person, or by telex

In contract law, a(n) _____________ is an erroneous belief about the facts of the contract at the time the contract is concluded

mistake of fact: -Legal assent is absent when a mistake of fact occurs